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Volume 97, November 10, 1937
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 97
National Academy of Political Science Speech
Delivered November 10, 1937
Part III
Regraded Unclassified
Book
Page
Speeches by HMJr
Before National Academy of Political Science, 11/10/37
Complete set of drafts as provided by Seltzer
(Numbers 12 through 17) - See also Book XCVI
XCVII
1
Upham draft
164
Statistical tables showing actual expenditures
1926 through 1937
184,207,209,
225,232
Statistical tables showing proprietary interest of
United States in Government corporations and credit
agencies as of June 30, 1929, to June 30, 1937
188
Social Security funds and the budget: Gaston memorandum
191
Bureau of Budget memoranda on Resettlement Administration
and Public Works Administration (major construction
allocations; revolving fund)
193,214
Bureau of Budget memorandum on Export-Import Bank
203
Reconstruction Finance Corporation commitments
210,212
Public highway expenditures
230
HMJr thanks Viner on day speech goes to mimeographer -
11/8/37 - See Book XCIV, page 158
Speech discussed at 9:30 group meeting - 11/9/37 -
See Book XCIV, page 162
Reading copy
239
Mimeographed copy
270
Regraded Unclassified
1
Address of the Secretary of the Treasury, to be
Delivered before the Academy of Political Science,
at the Hotel Astor, New York City, Wednesday Evening,
November 10, 1937
I am glad to accept the invitation of the Academy of
Political Science to discuss before its members assembled
here tonight the subject of Federal spending and its
relation to the balancing of the Federal budget.
Nineteen years ago tomorrow, we signed the Armistice
ending the World War. That war was unbelievably costly in
human values, and it was enormously costly in material
values. In the two years between the middle of 1917 and the
middle of 1919, the Federal Government spent thirty-one
billion dollars and sustained a net deficit of twenty-two
billion dollars.
During the past four years, this country has been
engaged in another war. This time our enemy was a great
economic disaster. In this war we bombed no cities; we
Regraded
2
- 2 -
machine-gunned no trenches; we killed no human beings.
In this war, we fought with jobs and with dollars to save
farmers from losing their farms; to save home owners from
losing their homes; to give not only bread but work to the
unemployed; to increase the security of jobs, property
values, and business profits; to bring order out of chaos
in our economic system.
This war, like that other war, required a many-sided
campaign under intelligent and courageous leadership -- a
leadership that was superbly supplied by President Roosevelt.
Finally, this war, like that other war, required a
large spending program. This program, plus the special
needs arising out of the great drought and the prepayment
of the soldiers' bonus, necessitated outlays during the
four years ended June 30, 1937, of some fourteen billion
dollars in excess of our receipts.
Regraded Unclassified
3
- 3 -
We deliberately used an unbalanced Federal budget
during the past four years to meet a great emergency.
That policy has succeeded. The emergency that we faced
in 1933 no longer exists.
I am fully aware thatmany of our problems remain
unsolved. I am aware that there still remains a considerable
volume of unemployment; that the speculative markets have
recently been under severe pressure; and that certain of
our business indexes have recently shown a declining
tendency. I am further aware that some persons contend that
another great spending program is desirable to ward off the
risk of a serious business depression.
I claim no prophetic insight into the future. But,
after giving serious and careful consideration to all these
and other factors, I have reached the firm conviction that
the domestic problems which face us today are
Regraded Inclassified
4
- 4 -
essentially different from those which faced us four years
ago. Many measures are required for their solution. One
of these measures in the present juncture is a balanced
budget.
Early in 1933, after three years of progressive
deterioration, our whole economic mechanism was demoralized.
Under these conditions, there was no agency outside of the
Federal Government with the resources and the courage to
bring about a business revival.
Today the situation 1s greatly changed. We are now
nearing the end of one of the most active years in the
business history of this country. On the whole, this
high level of activity has been of a healthy character --
not of the character that usually marks an unhealthy boom
and precedes a serious depression. The present situation
is not characterized by the existence of huge inventories,
Regraded Unclassified
5
- 5 -
high interest rates, over-extended credit positions, or
great surpluses of housing accommodations, capital equipment,
et cetera. We have not reached the stage of full employment
of our productive resources. On the contrary, from all
these standpoints, conditions are favorable for a continued
increase in the level of business activity.
This situation stands in sharp contrast to the banking
collapse, the bread lines, the bankruptcies, and the general
demoralization of 1933. It also stands in contrast to the
unhealthy excesses of 1929.
The basic need today 18 to foster the application of
the driving force of private capital to the existing favorable
circumstances. We want to see capital go into the productive
channels of private industry. We want to see private
business expand. We believe that the bulk of the remaining
unemployment will disappear as private capital funds are
S
- 6 -
increasingly employed in productive enterprises. We
believe that one of the most important ways of achieving
these ends at this time 18 to balance the Federal budget.
In this connection, I should like to point out that
the underlying technical conditions that made deficit
spending the wisest kind of economic policy during the
depression no longer exist. Thus, when we borrowed during
the depression to finance our deficit spending, a large
part of the funds was obtained through an expansion of
bank credit. To this extent, our spending did not absorb
capital funds that might otherwise have gone into private
industry, nor did it absorb taxpayers' funds that might
otherwise have gone into private consumption. Even to the
extent that our bonds and notes were purchased by
non-banking investors, the effect was largely to put to
work capital funds that would otherwise have remained idle.
Regraded
7
- 7 -
A different situation prevails today. Our industrial
recovery has created large new demands for private capital.
Our commercial banks are again utilizing their credit
resources for the financing of private industry. During
the first six months of the present calendar year, the
insured commercial banks of the country reduced their
holdings of Government securities by six hundred eighty-five
million dollars in order to meet actual and prospective
demands for commercial credit. The obligations that they
sold, plus an amount equal to the securities newly marketed
by the Treasury, were purchased by investors. Any deficit
spending that takes place under these conditions must be
financed in large part by capital funds that would otherwise
be available for business purposes.
Regraded Unclassified
8
- OR -
Despite the substantial increase in the public debt
during the past four years, the credit of the Federal
Government has remained absolutely unimpaired. Not once
during even the darkest days of the depression did the
Treasury experience the slightest difficulty in borrowing
all the funds that were required. Moreover, the rates of
interest on our borrowings have been lower, for comparable
securities, than at any other time in the history of the
country.
We wish to preserve the financial power of the
Federal Government to aid in restoring economic order in
the future, if the need again arises. To preserve this
power, we must liquidate during prosperity the debts
incurred during periods of depression.
Regraded Unclassified
9
- 9 -
I turn now to the immediate practical aspects of
budget balancing for the coming fiscal year. What are
the controlling figures?
Our total receipts for this year are estimated at
about six billion six hundred millions, and our total net
expenditures at about seven billion three hundred millions,
leaving a net deficit of roughly seven hundred millions.
To seek an ordinary balancing of the budget next
year -- that is, a balance after full provision for
accruing liabilities for old-age benefit payments, but
exclusive of debt retirement --, we.must therefore
accomplish a net improvement of seven hundred million
dollars in our budgetary position. In estimating revenues,
it is better to underestimate than to overestimate. We
should not count on an increase in revenues next year
from the existing tax structure, nor should.we impose
Regraded Unclassified
10
- 10 -
additional taxation. Instead, we should plan to bring
next year's expenditures within this year's income; and
then, if the tax receipts rise above those of this year,
the excess should be used to reduce the national debt.
Let us stop at this point to consider the revenue
side of the picture.
The Federal tax system affects every one in the
country. We in the Treasury are constantly studying the
tax problem with two objectives always before us: First,
that the tax burden shall be distributed as fairly as
possible and, second, that the collection of taxes shall
be as little burdensome to the taxpayer as possible.
It is with these aims that, by direction of the
President, we have been reviewing the whole tax structure
in the last few months and are just now in the process of
presenting to a committee of Congress the information we
Regraded Unclassified
11
- 11 -
have collected. The study has not been directed toward
raising new revenue. Rather we have sought to determine
whether there are inequalities and injustices in the
distribution of the tax burden and whether there are some
taxes whose cost of collection and whose burdensome effect
outweigh the revenue gain. In addition, we want to
simplify collection and make the taxpayer's record-keeping
less difficult.
In making this study, we have invited the assistance
and the advice of groups of taxpayers and of individuals.
We want to hear the taxpayer's side of the story. We want
all the facts we can get and we have obtained both facts
and opinions.
Our tax revenues come largely from individual earnings
and business profits. We do not wish to impose levies
which tend to dry up the sources of tax revenue. The laws
Regraded Unclassified
12
- 12 -
should be so written and administered that the taxpayer can
continue to make a reasonable profit with a minimum of
interference from his own Federal Government. or course,
tax policy cannot be determined from one individual case
alone. We must look at the whole picture. We must take
testimony and we must examine actual tax records and
returns.
We realize that our tax laws are too complicated; we
want to make them less 80. We realize that there are
inequities; we want to eliminate as many of them as we can.
The amount of our income-tax revenue is only about
half our total internal revenue. Less than three million
people out of our total population pay income taxes. We
would be applying the principle of capacity to pay more
Justly if we were to reduce the number of consumer taxes
and at the same time to increase the number of income tax
Regraded Unclassified
13
- 13 -
payers. Taxpayers who are squarely confronted with their
own tax burdens are bound to be keenly alive to the way
the money is being spent by their Government.
The budget now nearing completion is predicated on a
definite estimate of receipts, based on the existing tax
structure. It is a cardinal point that the tax system, as
revised, must not yield a smaller return for 1939 than the
present system would yield.
We want to adjust inequalities and remedy defects in
the tax laws. In doing this, we have sought the help of
the taxpayer and have given him a sympathetic hearing. If
we find that the operation of any particular tax is unfair,
we stand ready to say 80 publicly.
Regraded Unclassified
14
- 14 -
Our immediate goal, then, should be to reduce
expenditures by seven hundred million dollars. In addition,
every dollar that the Treasury realizes from the liquidation
of revolving funds, and from other repayments of loans and
capital advances, should be set aside for debt retirement.
In no event, in my opinion, should We contemplate total net
expenditures in excess of the level of this year's estimated
receipts. That means that our expenditures must not exceed
six billion six hundred fifty million dollars for the
coming year.
Our problem is clear. Our expenditures must be cut
seven hundred million dollars.
But where can cuts totaling this amount be made? After
careful study of the whole problem, I have come to the
following conclusions: On the one hand, little or no money
can be saved in the regular operating expenses of the
Regraded Unclassified
15
- 15 -
Federal Government, including the national defense and
interest on the public debt. Further, our expenditures
under the Social Security Act will probably increase by a
hundred million dollars or more in the next fiscal year.
On the other hand, by focusing attention on the several
classes of expenditures that have been mainly responsible
for our past deficits -- public highways, public works,
unemployment relief, and agriculture --, I am convinced that
the necessary savings can be made.
Let me give you a rough idea of the possible savings
in these fields.
First, take the item of highway expenditures. Prior
to the depression, the Federal grants to the States for
public highway construction regularly ran under one hundred
million dollars annually. This year the total Federal outlays
for highways, inclusive of emergency expenditures, are
Regraded Unclassified
16
- 16 -
estimated at two hundred fifty-three millions; and, in
addition, the existing highway programs call for new
appropriations totaling more than four hundred million dollars
for the next two years. I believe it is now time to return
to the average annual level of highway expenditures that
existed prior to the depression.
Second, there is the field of public works, other than
highways, on which we are spending five hundred seventy-three
millions this year. This is a greater sum than was spent
for this purpose during the entire five-year period between
1926 and 1930, inclusive. Next year, despite the fact that
available unspent appropriations for this purpose already
exceed six hundred millions, I believe that we can and
should move definitely toward a lower level of public works
outlays.
Regraded Unclassified
17
- 17 -
Third, it should be possible to make a further
substantial reduction in our outlays for unemployment relief
and the C.C.C. camps. During the present fiscal year, by
reason of business recovery, these expenditures are already
being reduced by some seven hundred eighty millions below
last year's.
I turn next to our expenditures on behalf of agriculture.
The plight of agriculture in the depression called for
emergency aid, not only in the farmers' interest, but in
the interest of all of us. As many of you know, I have
been deeply concerned for more than twenty years with the
problems of agriculture, and I am most keenly interested
in doing all that can be done to remove the economic
disadvantages that the farmers have suffered. That very
interest impels me to believe and to state with all the
force at my command that agriculture cannot continue to
rely on merely temporary expedients.
Regraded Unclassified
18
- 18 -
Besides the one hundred sixteen millions included in
this year's budget for the general work of the Department
of Agriculture, there are, among other items, estimated
expenditures of four hundred seventy-five millions for the
soil conservation program, thirty-three millions for rural
electrification, fifty-five millions for the Federal land
banks to provide lower interest rates, one hundred millions
for commodity loans, and one hundred twenty-five millions
for resettlement. These 1tems total nine hundred three
millions for this fiscal year.
Despite the magnitude of the sums we are now expending
for agricultural purposes, you are all aware that discussion
1s taking place in Congressional committees of further
measures in aid of agriculture that may involve large
additional expenditures.
Regraded Unclassified
19
- 19 -
I am strongly in favor of a long-range program to
maintain the independence and the purchasing power of the
farmer. That program cannot endure and cannot render
lasting aid to the farmer unless it be soundly based. The
farmer himself does not want subsidies, but rather such
fair prices and such balanced production of crops as will
make subsidies unnecessary for his decent economic status.
A sound program must take into consideration the
farmer's opportunities in the foreign markets, as well as
in those at home; and the character and cost of that
program must be determined with full recognition of its
effects upon our whole national economy and of the
limitations imposed by the Federal finances.
Balancing the budget is in the interest of our
agricultural 8.8 well as of other parts of our population;
and it requires the cooperation of the farmer as well as
other sections of the public.
Regraded Unclassified
20
- 20 -
With the solid support of the public, I believe that
economies totaling seven hundred millions or more can be
achieved in the four fields that I have cited. Since the
estimated increased costs of our social security program
are more than offset by estimated reductions in miscellaneous
and supplemental items, it should be possible to achieve
an ordinary balancing of the budget next year.
There may be some persons who would counsel a more
drastic reduction of expenditures or a program of far
heavier taxation in order to make certain a substantial
reduction in the public debt in the next fiscal year. There
are serious objections to such a course.
We are definitely in a transition period between
unbalanced and balanced Federal budgets. We are making
great progress toward a balanced budget.
Regraded Unclassified
21
- 21 -
Relatively few persons realize the remarkable fact
that the net improvement this year in the budgetary position
of the Federal Government will amount to more than two
billion dollars. In other words, the net deficit this year
is estimated at less than seven hundred millions as compared
with more than twenty-seven hundred millions last year.
This net improvement of more than two billion dollars
that is taking place in a single year provides the best
answer to those who have publicly despaired of our
willingness or our ability to balance the Federal budget.
I firmly believe that there is just as much danger to
our economy as a whole in moving too rapidly in this
direction as there would be in not moving at all.
The minimum goal that I propose will by no means be
easy to achieve.
Regraded Unclassified
22
- 22 -
I have already indicated my belief that it would be
unwise to raise taxes at this time solely to accumulate a
surplus for debt retirement. More than two-thirds of this
year's budgetary improvement comes from increased revenue,
rather than from reductions in expenditures.
There are equally compelling considerations on the
expenditure side. I strongly favor a vigorous program for
the progressive reduction of Federal expenditures to the
minimum demanded by the Government's increased responsibilities.
But it would be clearly unwise, and disruptive to many
sections of private industry, if we were suddenly to slash
Government expenditures by more than the amount I have
indicated.
In addition to these considerations, there 18 a new
and important aspect of our budget that must now be considered
in analyzing the economic effects of Federal expenditures
Regraded Unclassified
23
- 23 -
and receipts. The Social Security Act has introduced new
items into our budget. A major one of these, the annual
appropriation for the Old-Age Reserve Account, calls for
the investment of this appropriation in Government
obligations. The same Act also provides for the investment
in Government obligations of moneys paid by the States
into the Unemployment Trust Fund.
The funds paid into both of these accounts operate
Just like payments made by an individual to a private
insurance company. Such a company invests your premiums
in Government obligations, in farm and urban mortgages, in
railroad, industrial, and public utility bonds, and in other
forms of investment approved by one or more of the
forty-eight different State laws. All that the insurance
company has when it has invested your premiums in this
manner, are bundles of pieces of paper representing all
Regraded Unclassified
24
- 24 -
kinds of promises to repay your money with interest to the
insurance company.
The Federal Government, in connection with the 01d-Age
Reserve Account and the Unemployment Trust Fund, also
invests your money in pieces of paper. But these pieces of
paper are Government bonds and not private promises to pay.
It 18 not overstating the case to say that your money 1s
safer in Government bonds than in a multiplicity of private
obligations, though, of course, I am in no way reflecting
on the soundness of private insurance companies.
It is very clear that the credit of the Government is
the soundest in the Nation. And if anything shouldhappen
to your Government, nothing else would have any value at all.
Now, when the Treasury invests your old-age taxes and
your unemployment compensation taxes in Government bonds,
it reduces the amount of the public debt held by private
investors. This is obviously 80 if the Treasury buys bonds
Regraded Unclassified
25
- 25 -
in the market directly for the accounts. However, the rates
of interest which the Treasury is required by law to pay on
funds invested for these accounts are higher than those
which can be obtained by purchasing suitable Government
obligations in the open market. Hence, the Treasury 1s
issuing special Government bonds to these accounts, and
is using the funds 80 obtained to reduce the amount of its
obligations sold to or held by private investors.
Next year, as a result of the Social Security Act and
the related State laws, it is estimated that the Federal
Treasury will receive more than one billion dollars net for
investment in Government obligations for these two accounts.
With a balanced budget, this billion dollars will be used
to retire public debt now in the hands of private investors.
In other words, the Treasury next year will be adding one
billion dollars to the supply of funds in the capital market.
Regraded Unclassified
26
- 26 -
Even during the decade of the Twenties, when the
Treasury was receiving large payments of interest and
principal on war debts, and from the sale of surplus war
materials, the maximum reduction made in any single year in
the public debt held by private investors was one billion
three hundred millions.
My object this evening has been to present, as clearly
and as frankly as I know how, a comprehensive picture of
Federal expenditures and the budgetary outlook. I have tried
to make plain the underlying economic reasons, as well as the
humanitarian ones, for the past deficits; and I have tried
to bring out clearly the underlying economic considerations
that now demand a balanced Federal budget. I have shown
why, in my opinion, this balance should be sought by a
reduction of seven hundred million dollars in expenditures,
and why a large surplus for debt retirement would be
Regraded Unclassified
27
- 27 -
undesirable at this time if it must be achieved by
eliminating essential Federal services or by increasing
the existing tax burden.
The principal aims of our budgetary policy have been,
and I hope will continue to be, to promote a large volume
and healthy character of business activity, a maximum volume
of employment at good wages in private industry, fair
treatment for our agricultural population, adequate revenues
to meet the increased services now demanded of the Federal
Government, and the preservation of the credit and currency
of the United States, on which depends the security of jobs,
property values, and orderly business relations.
Regraded Unclassifi
28
#13
Address of the Secretary of the Treasury, to be
Delivered before the Academy of Political Science,
at the Hotel Astor, New York City, Wednesday Evening,
November 10, 1937
I am glad to accept the invitation of the Academy of
Political Science to discuss before its members and guests
assembled here tonight the subject of Federal spending and
its relation to the balancing of the Federal budget.
Nineteen years ago tomorrow, we signed the Armistice
ending the World War. That war was enormously costly in
human values, and it was enormously costly in material
values. In the two years between the middle of 1917 and the
middle of 1919, the Federal Government spent thirty-one
billion dollars and sustained a net deficit of twenty-two
billion dollars.
During the past four years, this country has been
engaged in another war. This time our enemy was a great
economic disaster. In this war we bombed no cities; we
Regraded Unclassified
29
- 2 -
machine-gunned no trenches; we killed no human beings.
In this war, we fought with Jobs and with dollars to save
farmers from losing their farms; to save home owners from
losing their homes; to give not only bread but work to the
unemployed; to increase the security of jobs, property
values, and business profits; to bring order out of chaos
in our economic system.
This war, like that other war, required a many-sided
campaign under intelligent and courageous leadership -- a
leadership that was superbly supplied by President Roosevelt.
Finally, this war, like that other war, required a
large spending program. This program, plus the special
needs arising out of the great drought and the prepayment
of the soldiers' bonus, necessitated outlays during the
four years ended June 30, 1937, of some fourteen billion
dollars in excess of our receipts.
30
- 3 -
We deliberately used an unbalanced Federal budget
during the past four years to meet a great emergency.
That policy has succeeded. The emergency that we faced
in 1933 no longer exists.
I am fully aware that many of our problems remain
unsolved. I am aware that there still remains a considerable
volume of unemployment; that the speculative markets have
recently been under severe pressure; and that certain of
our business indexes have recently shown a declining
tendency. I am further aware that some persons contend that
another great spending program is desirable to ward off the
risk of a serious business depression.
I claim no prophetic insight into the future. But,
after giving serious and careful consideration to all these
and other factors, I have reached the firm conviction that
the domestic problems which face us today are essentially
Regraded Unclassified
31
- 4 -
different from those which faced us four years ago. Many
measures are required for their solution. One of these
measures in the present juncture is a balanced budget.
Early in 1933, after three years of progressive
deterioration, our whole economic mechanism was demoralized.
Under these conditions, there was no agency outside of the
Federal Government with the resources and the courage to
bring about a business revival.
Today the situation is greatly changed. We are now
nearing the end of one of the most active years in the
business history of this country. On the whole, this
high level of activity has been of a healthy character --
not of the character that usually marks an unhealthy boom
and precedes a serious depression. The present situation
is not characterized by the existence of huge inventories,
Regraded Unclassified
32
- 5 -
high interest rates, over-extended credit positions, or
great surpluses of housing accomodations, capital equipment,
et cetera. We have not reached the stage of full employment
of our productive resources. On the contrary, from all
these standpoints, conditions are favorable for a continued
increase .in the level of business activity.
This situation stands in sharp contrast to the banking
collapse, the bread lines, the bankruptcies, and the general
demoralization of 1933. It also stands in contrast to the
unhealthy excesses of 1929.
The basic need today is to foster the application of
the driving force of private capital to existing favorable
circumstances. We want to gee capital go into the productive.
channels of private industry. We want to see private
business expand. We believe that the bulk of the remaining
unemployment will disappear as private capital funds are
Regraded Unclassified
33
- 6 -
increasingly employed in productive enterprises. We
believe that one of the most important ways of achieving
these ends at this time is to balance the Federal budget.
In this connection, I should like to point out that
the underlying conditions that made deficit spending the
wisest kind of economic policy during the depression no
longer exist. Thus, when we borrowed during the depression
to finance our deficit spending, a large part of the funds
was obtained through an expansion of bank credit. To
this extent, our spending did not absorb capital funds
that might otherwise have gone into private industry, nor
did it absorb taxpayers' funds that might otherwise have
gone into private consumption. Even to the extent that our
bonds and notes were purchased by non-banking investors,
the effect was largely to put to work capital funds that
would otherwise have remained idle.
Regraded Unclassified
34
- 7 -
A different situation prevails today. Our industrial
recovery has created large new demands for private capital.
Our commercial banks are again utilizing their credit
resources for the financing of private industry. During
the first six months of the present calendar year, the
insured commercial banks of the country reduced their
holdings of Government securities by six hundred eighty-five
million dollars in order to meet actual and prospective
demands for commercial credit. The obligations that they
sold, plus an amount equal to the securities newly marketed
by the Treasury, were purchased by investors. Any deficit
spending that takes place under these conditions must be
financed in large part by capital funds that would otherwise
be available for business purposes.
Regraded Unclassified
35
- 8 -
Despite the substantial increase in the public debt
during the past four years, the credit of the Federal
Government has remained absolutely unimpaired. Not once
during even the darkest days of the depression did the
Treasury experience the slightest difficulty in borrowing
all the funds that were required. Moreover, the rates of
interest on our borrowings have been lower, for comparable
securities, than at any other time in the history of the
country.
We wish to preserve the financial power of the
Federal Government to aid in restoring economic order in
the future, if the need again arises. To preserve this
power we must liquidate during prosperity the debts
incurred during periods of depression.
Regraded Unclassified
38
- 9 -
I turn now to the immediate practical aspects of
budget balancing for the coming fiscal year. What are
the controlling figures?
Our total receipts for this year are estimated at
about six billion six hundred millions, and our total net
expenditures at about seven billion three hundred millions,
leaving a net deficit of roughly seven hundred millions.
To seek an ordinary balancing of the budget next
year -- that is, a balance after full provision for
accruing liabilities for old-age benefit payments, but
exclusive of debt retirement --, we must therefore
accomplish a net improvement of seven hundred million
dollars in our budgetary position. In estimating revenues,
it is better to underestimate than to overestimate. We
should not count on an increase in revenues next year
from the existing tax structure, nor should we impose
Regraded Unclassified
37
- 10 - -
additional taxation. Instead, we should plan to bring
next year's expenditures within this year's income; and
then, 1f the tax receipts rise above those of this year,
the excess should be used to reduce the national debt.
Let us stop at this point to consider the revenue
side of the picture.
The Federal tax system affects every one in the
country. We in the Treasury are constantly studying the
tax problem with two objectives always before us: First,
that the tax burden shall be distributed as fairly as
possible and, second, that the collection of taxes shall
be as little burdensome to the taxpayer as possible.
It is with these aims that, by direction of the
President, we have been reviewing the whole tax structure
in the last few months and are just now in the process of
presenting to a committee of Congress the information we
Regraded Unclassified
38
- 11 -
have collected. The study has not been directed toward
raising new revenue. Rather we have sought to determine
whether there are inequalities and injustices in the
distribution of the tax burden and whether there are some
taxes whose cost of collection and whose burdensome effect
outweigh the revenue gain. In addition, we want to
simplify collection and make the taxpayer's record-keeping
less difficult.
In making this study, we have invited the assistance
and the advice of groups of taxpayers and of individuals.
We want to hear the taxpayer's side of the story. We want
all the facts we can get and we have obtained both facts
and opinions.
Our tax revenues come largely from individual earnings
and business profits. We do not wish to impose levies
which tend to dry up the sources of tax revenue. The laws
Regraded Unclassified
39
- 12 -
should be so written and administered that the taxpayer can
continue to make a reasonable profit with a minimum of
interference from his own Federal Government. Of course,
tax policy cannot be determined from one individual case
alone. We must look at the whole picture. We must take
testimony and we must examine actual tax records and
returns.
We realize that our tax laws are too complicated; we
want to make them less 80. We realize that there are
inequities; we want to eliminate as many of them as we can.
The amount of our income-tax revenue is only about
half our total internal revenue. Less than three million
people out of our total population pay income taxes. We
would be applying the principle of capacity to pay more
justly if we were to reduce the number of consumer taxes
and at the same time to increase the number of income tax
Regraded Unclassified
40
- 13 -
payers. Taxpayers who are squarely confronted with their own
tax burdens are bound to be keenly alive to the way the
money is being spent by their Government.
The budget now nearing completion 1s predicated on a
definite estimate of receipts, based on the existing tax
structure. It is 8. cardinal point that the tax system, as
revised, must not yield a smaller return for 1939 than the
present system would yield.
We want to adjust inequalities and remedy defects in
the tax laws. In doing this, we have sought the help of
the taxpayer and have given him a sympathetic hearing. If
we find that the operation of any particular tax is unfair,
we stand ready to say so publicly.
Regraded Unclassified
41
- 14 -
Our immediate goal, then, should be to reduce
expenditures by seven hundred million dollars. In no
event, in my opinion, should we contemplate total net
expenditures in excess of the level of this year's
estimated receipts. That means that our expenditures
must not exceed six billion six hundred fifty million
dollars for the coming year.
Our problem is clear. Our expenditures must be out
seven hundred million dollars.
But where can cuts totaling this amount be made? After
careful study of the whole problem, I have come to the
following conclusions: On the one hand, little or no money
can be saved in the regular operating expenses of the
Regraded Unclassified
42
- 15 -
Federal Government, including the national defense and
interest on the public debt. Further, our expenditures
under the Social Security Act will probably increase by a
hundred million dollars or more in the next fiscal year.
On the other hand, by focusing attention on the several
classes of expenditures that have been mainly responsible
for our past deficits -- public highways, public works,
unemployment relief, and agriculture --, it is apparent that
great savings can be made.
Let me give you a rough idea of the possible savings
in these fields.
First, take the item of highway expenditures. Prior
to the depression, the Federal grants to the States for
public highway construction regularly ran under one hundred
million dollars annually. This year the total Federal outlays
for highways, inclusive of emergency expenditures, are
Regraded Unclassified
43
- 16 -
estimated at two hundred fifty-three millions; and, in
addition, the existing highway programs call for new
appropriations totaling more than four hundred million dollars
for the next two years. I believe it is now time to return
to the average annual level of highway expenditures that
existed prior to the depression.
Second, there is the field of public works, other than
highways, on which we are spending five hundred seventy-three
millions this year. This 1s a greater sum than was spent
for this purpose during the entire five-year period between
1926 and 1930, inclusive. Next year, despite the fact that
available unspent appropriations for this purpose already
exceed six hundred millions, I believe that we can and
should move definitely toward a lower level of public works
outlays.
Regraded Unclassified
44
- 17 -
Third, it should be possible to make a further
substantial reduction in our outlays for unemployment relief
and the C.C.C. camps. During the present fiscal year, by
reason of business recovery, these expenditures are already
being reduced by some seven hundred eighty millions below
last year's.
I turn next to our expenditures on behalf of agriculture.
The plight of agriculture in the depression called for
emergency aid, not only in the farmers' interest, but in
the interest of all of us. As many of you know, I have
been deeply concerned for more than twenty years with the
problems of agriculture, and I am most keenly interested
in doing all that can be done to remove the economic
disadvantages that the farmers have suffered. That very
interest impels me to believe and to state with all the
force at my command that agriculture cannot continue to
rely on merely temporary expedients.
Regraded Unclassified
45
- 18 -
Besides the one hundred sixteen millions included in
this year's budget for the general work of the Department
of Agriculture, there are, among other items, estimated
expenditures of four hundred seventy-five millions for the
soil conservation program, thirty-three millions for rural
-
electrification, fifty-five millions for the Federal land
banks to provide lower interest rates, one hundred millions
for commodity loans, and one hundred twenty-five millions
for resettlement. These items total nine hundred three
millions for this fiscal year.
Despite the magnitude of the sums we are now expending
for agricultural purposes, you are all aware that discussion
is taking place in Congressional committees of further
measures in aid of agriculture that may involve large
additional expenditures.
Regraded Unclassifier
48
-19-
I am strongly in favor of a long-range program to
maintain the independence and the purchasing power of the
farmer. That program cannot endure and cannot render
lasting aid to the farmer unless it be soundly based. The
farmer himself does not want subsidies, but rather such
fair prices and such balanced production of crops as will
make subsidies unnecessary for his decent economic status.
A sound program must take into consideration the
farmer's opportunities in the foreign markets, as well as
in those at home; and the character and cost of that
program must be determined with full recognition of its
effects upon our whole national economy and of the
limitations imposed by the Federal finances.
Balancing the budget 18 in the interest of our
agricultural as well as of other parts of our population;
and it requires the cooperation of the farmer as well as
other sections of the public.
47
-20-
With the solid support of the public, I believe that
economies totaling seven hundred millions or more can be
achieved in the four fields that I have cited. Since the
estimated increased costs of our social security program
are more than offset by estimated reductions in miscellaneous
and supplemental items, it should be possible to achieve
an ordinary balancing of the budget next year.
There may be some persons who would counsel a more
drastic reduction of expenditures or a program of far
heavier taxation in order to make certain a substantial
reduction in the public debt in the next fiscal year.
There are serious objections to such a course.
We are definitely in a transition period between
unbalanced and balanced Federal budgets. We are making
great progress toward a balanced budget.
48
-21-
Relatively few persons realize the remarkable fact
that the net improvement this year in the budgetary position
of the Federal Government will amount to more than two
billion dollars. In other words, the net deficit this year
is estimated at less than seven hundred millions as compared
with more than twenty-seven hundred millions last year.
This net improvement of more than two billion dollars
that is taking place in a single year provides the best
answer to those who have publicly despaired of our ability
to balance the Federal budget.
I firmly believe that there is just as much danger to
our economy as a whole in moving too rapidly in this
direction as there would be in not moving at all.
The minimum goal that I propose will by no means be
easy to achieve.
Regraded Unclassified
49
-22-
I have already indicated my belief that it would be
unwise to raise taxes at this time solely to accumulate a
surplus for debt retirement. More than two-thirds of this
year's budgetary improvement comes from increased revenue,
rather than from reductions in expenditures.
There are equally compelling considerations on the
expenditure side. I strongly favor a vigorous program for
the progressive reduction of Federal expenditures to the
minimum demanded by the Government's increased responsibilities.
But it would be clearly unwise, and disruptive to many
sections of private industry, if we were suddenly to slash
Government expenditures by more than the amount I have
indicated.
In addition to these considerations, there is a new
and important aspect of our budget that must now be considered
in analyzing the economic effects of Federal expenditures
Regraded Unclassified
50
-23-
and receipts. The Social Security Act has introduced new
items into our budget. A major one of these, the annual
appropriation for the Old-Age Reserve Account, calls for
the investment of this appropriation in Government
obligations. The same Act also provides for the investment
in Government obligations of moneys paid by the States
into the Unemployment Trust Fund.
The funds paid into both of these accounts are handled
very much like payments made by an individual to a private
insurance company. Such a company invests your premiums
in Government obligations, in farm and urban mortgages, in
railroad, industrial, and public utility bonds, and in other
forms of investment approved by one or more of the
forty-eight different State laws. The manner in which
these funds must be invested is laid down by the State
laws and embodies the very sound principle of diversified
risks.
Regraded Unclassified
51
-24-
The Federal Government, in connection with the Old-Age
Reserve Account and the Unemployment Trust Fund, also
invests the money which it receives in the manner laid
down by Congress in Government obligations. Government
obligations, of course, represent the most diversified
risk available in this country as they rest on the tax
obligations of all industries and all individuals.
When the Treasury invests old-age receipts and
unemployment compensation receipts in Government bonds,
it reduces the amount of the public debt held by private
investors. This is obviously so if the Treasury buys bonds
Regraded Unclassified
52
-25-
in the market directly for the accounts. However, the rates
of interest which the Treasury is required by law to pay on
funds invested for the old-age reserve account are higher
than those which can be obtained by purchasing suitable
Government obligations in the open market. Hence, the
Treasury is issuing special obligations to this account
and is using the funds so obtained to reduce the amount
of its obligations sold to or held by private investors.
Next year, as a result of the Social Security Act and
the related State laws, it is estimated that the Federal
Treasury will receive more than one billion dollars net for
investment in Government obligations for these two accounts.
With a balanced budget, this billion dollars will be used to
retire public debt now in the hands of private investors.
Through this operation the Treasury next year will be adding
one billion dollars to the supply of funds in the capital market.
53
-26-
Even during the decade of the Twenties, when the
Treasury was receiving large payments of interest and
principal on war debts, and from the sale of surplus war
materials, the maximum reduction made in any single year in
the public debt held by private investors was one billion
three hundred millions.
My object this evening has been to present, as clearly
and as frankly 8.8 I know how, a comprehensive picture of
Federal expenditures and the budgetary outlook. I have tried
to make plain the underlying economic reasons, as well as the
humanitarian ones, for the past deficits; and I have tried
to bring out clearly the underlying economic considerations
that now demand a balanced Federal budget. I have shown
why, in my opinion, this balance should be sought by a
reduction in expenditures, and why a large surplus for
debt retirement would be undesirable at this time if it
Regraded Unclassified
54
-27-
must be achieved by eliminating essential Federal
responsibilities or by increasing the existing tax
burden.
The principal aims of our budgetary policy have been,
and I hope will continue to be, to promote a large volume
and healthy character of business activity, a maximum volume
of employment at good wages in private industry, fair
treatment for our agricultural population, adequate revenues
to meet the increased services now demanded of the Federal
Government, and the preservation of the credit and currency
of the United States, OR which depends the security of jobs,
property values, and orderly business relations.
Regraded Unclassified
55
#14
Address of the Secretary of the Treasury, to be
Delivered before the Academy of Political Science,
at the Hotel Astor, New York City, Wednesday Evening,
November 10, 1937
I am glad to accept the invitation of the Academy of
Political Science to discuss before its members and guests
assembled here tonight the subject of Federal spending and
its relation to the balancing of the Federal budget.
Nineteen years ago tomorrow, we signed the Armistice
ending the World War. That war was enormously costly in
human values, and it was enormously costly in material
values. In the two years between the middle of 1917 and the
middle of 1919, the Federal Government spent thirty-one
billion dollars and sustained a net deficit of twenty-two
billion dollars.
During the past four years, this country has been
engaged in another war. This time our enemy was a great
economic disaster. In this war we bombed no cities; we
Regraded Unclassified
56
- 2 -
machine-gunned no trenches; we killed no human beings.
In this war, we fought with jobs and with dollars to save
farmers from losing their farms; to save home owners from
losing their homes; to give not only bread but work to the
unemployed; to increase the security of jobs, property
values, and business profits; to bring order out of chaos
in our economic system.
This war, like that other war, required a many-sided
campaign under intelligent and courageous leadership -- a
leadership that was superbly supplied by President Roosevelt.
Finally, this war, like that other war, required a
large spending program. This program, plus the special
needs arising out of the great drought and the prepayment
of the soldiers' bonus, necessitated outlays during the
four years ended June 30, 1937, of some fourteen billion
dollars in excess of our receipts.
Regraded Unclassifie
57
- 3 -
We deliberately used an unbalanced Federal budget
during the past four years to meet a great emergency.
That policy has succeeded. The emergency that we faced
in 1933 no longer exists.
I am fully aware that many of our problems remain
unsolved. I am aware that there still remains a considerable
volume of unemployment; that the speculative markets have
recently been under severe pressure; and that certain of
our business indexes have recently shown a declining
tendency. I am further aware that some persons contend that
another great spending program is desirable to ward off the
risk of a serious business depression.
I claim no prophetic insight into the future. But,
after giving serious and careful consideration to all these
and other factors, I have reached the firm conviction that
the domestic problems which face us today are essentially
Regraded Unclassified
58
- 4 -
different from those which faced us four years ago. Many
measures are required for their solution. One of these
measures in the present juncture is 8. balanced budget.
Early in 1933, after three years of progressive
deterioration, our whole economic mechanism was demoralized.
Under these conditions, there was no agency outside of the
Federal Government with the resources and the courage to
bring about a business revival.
Today the situation is greatly changed. We are now
nearing the end of one of the most active years in the
business history of this country. On the whole, this
high level of activity has been of a healthy character --
not of the character that usually marks an unhealthy boom
and precedes a serious depression. The present situation
is not characterized by the existence of huge inventories,
Regraded Unclassified
59
- 5 -
high interest rates, over-extended credit positions, or
great surpluses of housing accommodations, capital equipment,
et cetera. We have not reached the stage of full employment
of our productive resources. On the contrary, from all
these standpoints, conditions are favorable for a continued
increase in the level of business activity.
This situation stands in sharp contrast to the banking
collapse, the bread lines, the bankruptcies, and the general
demoralization of 1933. It also stands in contrast to the
unhealthy excesses of 1929.
In this connection, I should like to point out that
the underlying conditions that made deficit spending the
wisest kind of economic policy during the depression no
longer exist. Thus, when we borrowed during the depression
to finance our deficit spending, a large part of the funds
was obtained through an expansion of bank credit. To
Regraded Unclassified
60
- 6 -
this extent, our spending did not absorb capital funds
that might otherwise have gone into private industry, nor
did it absorb taxpayers' funds that might otherwise have
gone into private consumption. Even to the extent that our
bonds and notes were purchased by non-banking investors,
the effect was largely to put to work capital funds that
would otherwise have remained idle.
A different situation prevails today. Our industrial
recovery has created large new demands for private capital.
Our commercial banks are again utilizing their credit
resources for the financing of private industry. During
the first six months of the present calendar year, the
insured commercial banks of the country reduced their
holdings of Government securities by six hundred eighty-five
million dollars in order to meet actual and prospective
demands for commercial credit. The obligations that they
Regraded Unclassified
61
- 7 -
sold, plus an amount equal to the securities newly marketed
by the Treasury, were purchased by investors. Any deficit
spending that takes place under these conditions must be
financed in large part by capital funds that would otherwise
be available for business purposes.
The basic need today 1s to foster the application of
the driving force of private capital to existing favorable
circumstances. We want to see capital go into the productive
channels of private industry. We want to see private
business expand. We believe that the bulk of the remaining
unemployment will disappear as private capital funds are
increasingly employed in productive enterprises. We
believe that one of the most important ways of achieving
these ends at this time is to balance the Federal budget.
Regraded Unclassified
62
- g -
I turn now to the immediate practical aspects of
budget balancing for the coming fiscal year. What are
the controlling figures?
Our total receipts for this year are estimated at
about six billion six hundred fifty millions, and our total
net expenditures at about seven billion three hundred
forty-six millions, leaving a net deficit of roughly seven
hundred millions.
To seek an ordinary balancing of the budget next
year -- that is, a balance after full provision for
accruing liabilities for old-age benefit payments, but
exclusive of debt retirement --, we must therefore
accomplish a net improvement of seven hundred million
dollars in our budgetary position. In estimating revenues,
it is better to underestimate than to overestimate. We
should not count on an increase in revenues next year
Regraded Unclassifie
63
- 9 -
from the existing tax structure, nor should we impose
additional taxation. Instead, we should plan to bring
next year's expenditures within this year's income; and
then, if the tax receipts rise above those of this year,
the excess should be used to reduce the national debt.
Let us stop at this point to consider the revenue
side of the picture.
The Federal tax system affects every one in the
country. We in the Treasury are constantly studying the
tax problem with two objectives always before us: First,
that the tax burden shall be distributed as fairly as
possible and, second, that the collection of taxes shall
be as little burdensome to the taxpayer as possible.
It is with these aims that, by direction of the
President, we have been reviewing the whole tax structure
in the last few months and are just now in the process of
Regraded Unclassified
64
- 10 -
presenting to a committee of Congress the information we
have collected. The study has not been directed toward
raising new revenue. Rather we have sought to determine
whether there are inequalities and injustices in the
distribution of the tax burden and whether there are some
taxes whose cost of collection and whose burdensome effect
outweigh the revenue gain. In addition, we want to
simplify collection and make the taxpayer's record-keeping
less difficult.
In making this study, we have invited the assistance
and the advice of groups of taxpayers and of individuals.
We want to hear the taxpayer's side of the story. We want
all the facts we can get and we have obtained both facts
and opinions.
Our tax revenues come largely from individual earnings
and business profits. We do not wish to impose levies
Regraded Unclassified
65
- 11 -
which tend to dry up the sources of tax revenue. The laws
should be so written and administered that the taxpayer can
continue to make B. reasonable profit with a minimum of
interference from his own Federal Government. Of course,
tax policy cannot be determined from one individual case
alone. We must look at the whole picture. We must take
testimony and we must examine actual tax records and
returns.
We realize that our tax laws are too complicated; we
want to make them less so. We realize that there are
inequities; we want to eliminate as many of them as we can.
The amount of our income-tax revenue is only about
half our total internal revenue. Less than three million
people out of our total population pay income taxes. We
would be applying the principle of capacity to pay more
justly if we were to reduce the number of consumer taxes
Regraded Unclassified
66
- 12 -
and at the same time to increase the number of income tax
payers. Taxpayers who are squarely confronted with their
own tax burdens are bound to be keenly alive to the way
the money is being spent by their Government.
The budget now nearing completion 1s predicated on a
definite estimate of receipts, based on the existing tax
structure. It is 8. cardinal point that the tax system, as
revised, must not yield a smaller return for 1939 than the
present system would yield.
We want to adjust inequalities and remedy defects in
the tax laws. In doing this, we have sought the help of
the taxpayer and have given him a sympathetic hearing. If
we find that the operation of any particular tax is unfair,
we stand ready to say 80 publicly.
Regraded Unclassifie
67
- 13-
Our immediate goal, then, should be to reduce
expenditures by seven hundred million dollars. In other
words, we should not contemplate total net expenditures
in excess of the level of this year's estimated receipts.
But where can cuts totaling seven hundred millions
be made? After careful study of the whole problem, I
have come to the following conclusions: On the one hand,
little or no money can be saved in the regular operating
expenses of the
Regraded Unclassified
68
- 14 -
Federal Government, including the national defense and
interest on the public debt. Further, our expenditures
under the Social Security Act will probably increase by a
hundred million dollars or more in the.next fiscal year.
On the other hand, by focusing attention on the several
classes of expenditures that have been mainly responsible
for our past deficits -- public highways, public works,
unemployment relief, and agriculture --, it is apparent that
great savings can be made.
Let me give you a rough idea of the possible savings
in these fields.
First, take the item of highway expenditures. Prior
to the depression, the Federal grants to the States for
public highway construction regularly ran under one hundred
million dollars annually. This year the total Federal outlays
for highways, inclusive of emergency expenditures, are
69
- 15 -
estimated at two hundred fifty-three millions; and, in
addition, the existing highway programs call for new
appropriations totaling more than four hundred million dollars
for the next two years. I believe it is now time to return
- to the average annual level of highway expenditures that
existed prior to the depression.
Second, there is the field of public works, other than
highways, on which we are spending five hundred seventy-three
millions this year. This is a greater sum than was spent
for this purpose during the entire five-year period between
1926 and 1930, inclusive. Next year, despite the fact that
available unspent appropriations for this purpose already
exceed six hundred millions, I believe that we can and
should move definitely toward a lower level of public works
outlays.
70
- 16 -
Third, it should be possible to make a further
substantial reduction, though not a drastic one, in our
outlays for unemployment relief and the C.C.C. camps. During
the present fiscal year, by reason of more active private
business, these expenditures are already being reduced by
some seven hundred eighty millions below last year's.
I turn next to our expenditures on behalf of agriculture.
The total of this year's expenditures for the regular
activities of the department, the soil conservation
program, rural electrification, resettlement, commodity
loans, and lower interest rates for Federal land bank
borrowers, exceeds nine hundred million dollars. Despite
the magnitude of this sum, you are all aware that possible
further measures involving large additional expenditures
are now being discussed.
Regraded Unclassified
71
- 17 -
I am strongly in favor of a long-range program to
maintain the independence and the purchasing power of the
farmer. Such a program must take into consideration the
farmer's opportunities in the foreign markets as well as
in those at home; and no agricultural program can long
endure which makes excessive demands upon the Federal
Treasury, or is unfair to consumers. The farmer himself
does not want subsidies, but rather such fair prices and
such balanced production of crops as will make subsidies
unnecessary for his decent economic status.
Balancing the budget 1s in the interest of our
agricultural as well as of other parts of our population:
and 1t requires the cooperation of the farmer as well as
other sections of the public.
With the solid support of the public, I hope that
economies totaling seven hundred millions can be achieved
Regraded Unclassified
72
- 18 -
in the four fields that I have cited. Since the estimated
increased costs of our social security program are more
than offset by estimated reductions in miscellaneous and
supplemental items, it should be possible to achieve an
ordinary balancing of the budget next year without increased
taxes.
There may be some persons who would counsel a more
drastic reduction of expenditures or a program of far
heavier taxation in order to make certain a more substantial
reduction in the public debt in the next fiscal year. There
are serious objections to such a course.
I have already indicated that I believe it undesirable at
this time to increase taxation. There are equally compelling
considerations on the expenditure side. I strongly favor
a vigorous program for the progressive reduction of Federal
Regraded Unclassified
73
- 19 -
expenditures to the minimum demanded by the Government's
responsibilities. But it would clearly be disastrous to
many of the needy unemployed, and disruptive to many sections
of private industry, if we were suddenly to slash Government
expenditures by much more than the amount I have indicated.
We are definitely in a transition period between
unbalanced and balanced Federal budgets; but I firmly
believe that there is just as much danger to our economy
as a whole in moving too rapidly in this direction as there
would be in not moving at all.
Relatively few persons realize the remarkable fact
that the net improvement this year in the budgetary position
of the Federal Government will amount to more than two
billion dollars. In other words, the net deficit this year
is estimated at less than seven hundred million as compared
with more than twenty-seven hundred millions last year.
Regraded Unclassified
74
- 20 -
This net improvement of more than two billion dollars
in a single year provides the best answer to those who have
publicly despaired of our willingness or our ability to
balance the Federal budget.
More than two-thirds of this year's budgetary
improvement comes from increased revenue, rather than from
reductions in expenditures. Next year's balancing of the
budget can properly be sought in a reduction of expenditures.
In addition to these considerations, I should like
to point out that, as a result of the Social Security Act
and related State laws, it is estimated that the Federal
Government next year will receive more than one billion
dollars net for investment in Government securities for
the Unemployment Trust Fund and the Old-Age Reserve Account.
With a balanced budget, this billion dollars will be used
Regraded Unclassified
.. - 75
- 21 -
to retire public debt now in the hands of private investors.
While this operation by itself will not reduce the total
amount of the public debt, it will result in adding roughly
one billion dollars to the supply of funds in the capital
market.
Even during the decade of the Twenties, when the
Treasury was receiving large payments of interest and
principal on war debts, and from the sale of surplus war
materials, the maximum reduction made in any single year in
the public debt held by private investors was one billion
three hundred millions.
My object this evening has been to present, as clearly
and as frankly as I know how, a comprehensive picture of
Federal expenditures and the budgetary outlook. I have tried
to make plain the underlying economic reasons, as well as
the humanitarian ones, for the past deficits; and I have
Regraded Unclassified
: 76
- 22 -
tried to bring out clearly the underlying economic
considerations that now demand a balanced Federal budget.
I have shown why, in my opinion, this balance should be
sought by a reduction in expenditures, and why a large
surplus for debt retirement would be undesirable at this
time if it must be achieved by eliminating essential Federal
responsibilities or by increasing the existing tax burden.
The principal aims of our budgetary policy have been,
and I hope will continue to be, to promote a large volume
and healthy character of business activity, a maximum volume
of employment at good wages in private industry, fair
treatment for our agricultural population, adequate revenues
to meet the increased services now demanded of the Federal
Government, and the preservation of the credit and currency
of the United States, on which depends the security of jobs,
property values, and orderly business relations.
-reised
77
Address of the Secretary of the Treasury, to be
Delivered before the Academy of Political Science,
at the Hotel Astor, New York City, Wednesday Evening,
November 10, 1937
I am glad to accept the invitation of the Academy of
Political Science to discuss before its members and guests
the subject of Federal spending and its relation to the
balancing of the Federal budget.
Nineteen years ago tomorrow, we signed the Armistice
ending the World War. That war was enormously costly in
human values, and it was enormously costly in material
values. In the two years between the middle of 1917 and the
middle of 1919, the Federal Government spent thirty-one
billion dollars and sustained a net deficit of twenty-two
billion dollars.
During the past four years, this country has been
engaged in another war. This time our enemy was a great
economic disaster. In this war we bombed no cities; we
78
- 2 -
machine-gunned no trenches; we killed no human beings.
In this war, we fought with Jobs and with dollars to save
farmers from losing their farms; to save home owners from
losing their homes; to give not only bread but work to the
unemployed; to increase the security of jobs, property
values, and business profits; to bring order out of chaos
in our economic system.
This war, like that other war, required a many-sided
campaign under intelligent and courageous leadership -- a
leadership that was superbly supplied by President Roosevelt.
Finally, this war, like that other war, required a
large spending program. This program, plus the special
needs arising out of the great drought and the prepayment
of the soldiers' bonus, necessitated net outlays during the
four years ended June 30, 1937, of some fourteen billion
dollars in excess of our receipts.
79
- 3 -
We deliberately used an unbalanced Federal budget
during the past four years to meet a great emergency.
That policy has succeeded. The emergency that we faced
in 1933 no longer exists.
I am fully aware that many of our problems remain
unsolved. I am aware that there still remains a considerable
volume of unemployment; that the speculative markets have
recently been under severe pressure; and that our business
indexes have recently shown & declining tendency. I am
further aware that some persons contend that another great
spending program is desirable to ward off the risk of
another business depression.
I claim no prophetic insight into the future. But,
after giving serious and careful consideration to all these
and other factors, I have reached the firm conviction that
the domestic problems which face us today are essentially
80
- 4 -
different from those which faced us four years ago. Many
measures are required for their solution. One of these
measures in the present juncture is a determined movement
toward a balanced budget.
Early in 1933, after three years of progressive
deterioration, our whole economic mechanism was demoralized.
Under these conditions, there was no agency outside of the
Federal Government with the resources and the courage to
bring about a business revival.
Today the situation is greatly changed. We are now
nearing the end of one of the most active years in the
business history of this country. On the whole, this
high level of activity has been of a healthy character --
not of the character that usually marks an unhealthy boom
and precedes a serious depression. The present situation
is not characterized by the existence of huge inventories,
81
- 5 -
high interest rates, over-extended credit positions, or
great surpluses of housing accommodations, capital equipment,
et cetera. We have not reached the stage of full employment
of our productive resources. On the contrary, from all
these standpoints, conditions are favorable for a continued
increase in the level of business activity.
This situation stands in sharp contrast to the banking
collapse, the bread lines, the bankruptcies, and the general
demoralization of 1933. It also stands in contrast to the
unhealthy excesses of 1929.
In this connection, I should like to point out that the
underlying conditions that made deliberate deficit spending
the wisest kind of economic policy during the depression no
longer exist. Thus, when we borrowed during the depression
to finance our deficit spending, a large part of the funds
was obtained through an expansion of bank credit. To
82
- 6 -
this extent, our spending did not absorb capital funds
that might otherwise have gone into private industry, nor
did it absorb taxpayers' funds that might otherwise have
gone into private consumption. Even to the extent that our
bonds and notes were purchased by non-banking investors,
the effect was largely to put to work capital funds that
would otherwise have remained idle.
A different situation prevails today. Our industrial
recovery during the last year has created large new demands
for private capital. Our commercial banks have been again
utilizing their credit resources for the financing of private
industry. During the first six months of the present calendar
year, the insured commercial banks of the country reduced
their holdings of Government securities by six hundred eighty-
five million dollars in order to meet actual and prospective
demands for commercial credit. The obligations that they
83
- 7 -
sold, plus an amount equal to the securities newly marketed
by the Treasury, were purchased by investors. Any deficit
spending taking place under these conditions would have to
be financed in large part by capital funds that would
otherwise be available for business purposes.
The basic need today 1s to foster the application of
the driving force of private capital to existing favorable
circumstances. We want to see capital go into the productive
channels of private industry. We want to see private
business expand. We believe that the bulk of the remaining
unemployment will disappear as private capital funds are
increasingly employed in productive enterprises. We
believe that one of the most important ways of achieving
these ends at this time is to continue progress toward a
balance of the Federal budget.
84
- 8 -
I turn now to the immediate practical aspects of
budget balancing for the coming fiscal year. What are
the controlling figures?
Our total receipts for this year were estimated in the
President's budget summation of October 19 at about six
billion six hundred fifty millions, and our total net
expenditures at about seven billion three hundred forty-six
millions, leaving a net deficit of roughly seven hundred millions.
To attain an ordinary balancing of the budget next year --
that is, a balance after full provision for accruing
liabilities for old-age benefit payments, but exclusive of
debt retirement --, it would therefore be necessary to
acomplish a net improvement of seven hundred million dollars
in our budgetary position, as last estimated. In estimating
revenues, it is better to underestimate than to overestimate.
We should not count on an increase in revenues next year
Regraded Unclassified
85
- 9 -
from the existing tax structure, nor should we impose
additional taxation. Instead, we should plan to bring
next year's expenditures within this year's income.
Let us stop at this point to consider the revenue
side of the picture.
The Federal tax system affects every one in the
country. We in the Treasury are constantly studying the
tax problem with two objectives always before us: First,
that the tax burden shall be distributed as fairly as
possible, and second, that the collection of taxes shall
be as little burdensome to the taxpayer as possible.
It 1s with these aims that, by direction of the
President, we have been reviewing the whole tax structure
in the last few months and are just now in the process of
8S
- 15 -
estimated at two hundred fifty-three millions; and, in
addition, the existing highway programs call for new
appropriations totaling more than four hundred million dollars
for the next two years. I believe it is now time to return
to the average annual level of highway expenditures that
existed prior to the depression.
Second, there is the field of public works, other than
highways, on which we are spending five hundred seventy-three
millions this year. This is a greater sum than the total
that was spent for this purpose during the entire five-year
period between 1926 and 1930, inclusive. Next year, despite
the fact that available unspent appropriations for this
purpose already exceed six hundred millions, I believe that
we can and should move definitely toward a lower level of
public works outlays.
87
- 16 -
Third, it will be possible, I hope, to make a further
substantial reduction in our outlays for unemployment relief
and the C.C.C. camps. During the present fiscal year, by
reason of more active private business, these expenditures
are already being reduced by some seven hundred eighty
millions below last year's.
I turn next to our expenditures on behalf of agriculture.
The total of this year's expenditures, exclusive of public
highways, for the regular activities of the department, the
soil conservation program, rural electrification, resettlement,
commodity loans, and lower interest rates for Federal land
bank borrowers, exceeds nine hundred million dollars.
Despite the magnitude of this sum, you are all aware that
possible further measures involving large additional
expenditures are now being discussed.
88
- 19 -
expenditures to the minimum demanded by the Government's
responsibilities. But it would clearly be disastrous to
many of the needy unemployed, and disruptive to many sections
of private industry, if we were suddenly to slash Government
expenditures by much more than the amount I have indicated.
We are definitely in a transition period between
unbalanced and balanced Federal budgets; but I firmly
believe that there is just as much danger to our economy
as a whole in moving too rapidly in this direction as there
would be in not moving at all.
Relatively few persons realize the striking fact
that the net improvement this year in the budgetary position
of the Federal Government will amount to more than two
billion dollars. In other words, the net deficit this year
is estimated at less than seven hundred million as compared
with more than twenty-seven hundred millions last year.
Regraded Unclassified
89
- 21 -
to retire public debt now in the hands of private investors.
While this operation by itself will not reduce the total
amount of the public debt, it will result in adding roughly
one billion dollars to the supply of funds in the capital
market.
Even during the decade of the Twenties, when the
Treasury was receiving large payments of interest and
principal on war debts, and from the sale of surplus war
materials, the maximum reduction made in any single year in
the public debt held by private investors was one billion
three hundred millions.
My object this evening has been to present, as clearly
and as frankly as I know how, a comprehensive picture of
Federal expenditures and the budgetary outlook. I have tried
to make plain the underlying economic reasons, as well as
the humanitarian ones, for the past deficits; and I have
Regraded Unclassified
90
- 22 -
tried to bring out clearly the underlying economic
considerations that now demand a balanced Federal budget.
I have shown why, in my opinion, this balance should be
sought by a reduction in expenditures, and why a large
surplus for debt retirement would be undesirable at this
time if it must be achieved by eliminating essential Federal
responsibilities or by increasing the existing tax burden.
The principal aims of our budgetary policy have been,
and I hope will continue to be, to promote a large volume
and healthy character of business activity, a maximum volume
of employment at good wages in private industry, fair
treatment for our agricultural population, adequate revenues
to meet the services now demanded of the Federal Government,
and the preservation of the credit ,and currency of the
United States, on which depend the security of jobs,
property values, and orderly business relations.
#15 91
Address of the Secretary of the Treasury, to be
Delivered before the Academy of Political Science,
at the Hotel Astor, New York City, Wednesday Evening,
November 10, 1937
I welcome the opportunity to discuss before the members
and guests of the Academy of Political Science the subject
of Federal spending and its relation to the balancing of the
Federal budget.
Nineteen years ago tomorrow, we signed the Armistice
ending the World War. That war was enormously costly in
human values, and it was enormously costly in material
values. In the two years between the middle of 1917 and the
middle of 1919, the Federal Government sustained a net deficit
of twenty-two billion dollars.
During the past four years, this country has been
engaged in another war. This time our enemy was a great
economic disaster. In this war, we fought with jobs and
92
- 2 -
with dollars to save farmers from losing their farms; to save
home owners from losing their homes; to give not only bread
but work to the unemployed; to increase the security of jobs,
property values, and business profits; to bring order out of
chaos in our economic system.
This war, like that other war, required a many-sided
campaign under intelligent and courageous leadership -- a
leadership that was superbly supplied by President Roosevelt.
Finally, this war, like that other war, required a
large spending program. This program, plus the special
needs arising out of the great drought and the prepayment
of the soldiers' bonus, necessitated net outlays during the
four years ended June 30, 1937, of some fourteen billion
dollars in excess of our receipts.
93
- 3 -
We deliberately used an unbalanced Federal budget
during the past four years to meet a great emergency.
That policy has succeeded. The emergency that we faced
in 1933 no longer exists.
I am fully aware that many of our problems remain
unsolved. I am aware that there still remains a considerable
volume of unemployment; that the speculative markets have
recently been under severe pressure; and that our business
indexes have recently shown a declining tendency. I am
further aware that some persons contend that another great
spending program 1s desirable to ward off the risk of
another business depression.
I claim no prophetic insight into the future. But,
after giving serious and careful consideration to all these
and other factors, I have reached the firm conviction that
the domestic problems which face us today are essentially
94
- 4 -
different from those which faced us four years ago. Many
measures are required for their solution. One of these
measures, but only one, in the present juncture is a
determined movement toward a balanced budget.
Early in 1933, after three years of progressive
deterioration, our whole economic mechanism was demoralized,
Under these conditions, there was no agency outside of the
Federal Government with the resources and the courage to
bring about a business revival.
Today the situation is greatly changed. We are now
nearing the end of one of the most active years in the
business history of this country. On the whole, this
high level of activity has been of a healthy character -
not of the character that usually marks an unhealthy boom
and precedes 8. serious depression. The present situation
is not characterized by the existence of huge inventories,
Regraded Unclassified
95
- 5 -
high interest rates, over-extended credit positions, or
great surpluses of housing and capital equipment. We
have not reached the stage of full employment of our
productive resources. On the contrary, from all these
standpoints, conditions are favorable for a continued
increase in the level of business activity.
This stands in contrast to the unhealthy excesses
of 1929. It stands in even sharper contrast to the banking
collapse, the bread lines, the bankruptcies, and the general
demoralization of 1933.
Despite the substantial increase in the public debt
during the past four years, the credit of the Federal
Government has remained absolutely unimpaired. Not once
during even the darkest days of the depression did the
Treasury experience the slightest difficulty in borrowing
all the funds that were required. Moreover, the rates of
Regraded Unclassified
98
- 6 -
interest on our borrowings have been lower, for comparable
securities, than at any other time in the history of the
country.
But the underlying conditions that made deliberate
deficit spending the wisest kind of policy during the
depression no longer exist. Thus, when we borrowed during
the depression to finance our deficit spending, a large part
of the funds was obtained through an expansion of bank credit.
To this extent, our epending did not absorb capital funds
that might otherwise have gone into private industry, nor
did it absorb by taxation funds that might otherwise have
gone into private consumption. Even to the extent that our
bonds and notes were purchased by non-banking investors,
the effect was largely to put to work capital funds that
would otherwise have remained idle.
Regraded Unclassified
97
- 7 -
A different situation prevails today. Our industrial
recovery during the last year has created large new demands
for private capital. Our commercial banks have been again
utilizing their credit resources for the financing of private
industry. During the present calendar year, the insured
commercial banks of the country have substantially reduced
their holdings of Government securities in order to meet
actual and prospective demands for commercial credit. The
obligations that they sold, plus an amount equal to the
securities newly marketed by the Treasury, were purchased by
investors. Any deficit spending under such conditions would
have to be financed in large part by capital funds that
would otherwise be available for business purposes.
The basic need today is to foster the application of
the driving force of private capital to existing favorable
Regraded Unclassified
98
- 8 -
circumstances. We want to see capital go into the productive
channels of private industry. We want to see private
business expand. We believe that much of the remaining
unemployment will disappear as private capital funds are
increasingly employed in productive'enterprises. We
believe that one of the most important ways of achieving
these ends at this time is to continue progress toward a
balance of the Federal budget.
I turn now to the immediate practical aspects of
budget balancing for the coming fiscal year. What are
the controlling figures?
Our total receipts for this year were estimated in the
President's budget summation of October 19 at about six
billion six hundred fifty millions, and our total net
expenditures at about seven billion three hundred forty-six
millions, leaving an estimated net deficit of roughly seven
hundred millions.
Regraded
99
- 9 -
To attain an ordinary balancing of the budget next year -
that 1s, a balance after full provision for accruing
liabilities for old-age benefit payments, but exclusive of
debt retirement -, it would therefore be necessary to
accomplish a net improvement of seven hundred million dollars
in our budgetary position, 8.8 last estimated, In estimating
revenues, it is better to underestimate than to overestimate.
We should not count on an increase in revenues next year
from the existing tax structure. Nor should we impose
additional taxation. Instead, we should plan to bring
next year's expenditures within this year's income.
But where can cuts totaling seven hundred millions
be made? After careful study of the whole problem, I
have come to the following conclusions: On the one hand,
while everything possible is being and will be done to keep
8. tight rein on the regular operating expenses of the Federal
Government, including the national defense and interest on
Regraded Unclassified
100
- 10 -
the public debt, I do not believe that we can find large
savings in this field. Further, our expenditures under the
Social Security Act will increase next year.
On the other hand, by focusing attention on the several
classes of expenditures that have been mainly responsible
for our past deficits - public highways, public works,
unemployment relief, and agriculture --, it 1s apparent that
great savings can be made.
Let me give you an idea of the possibilities for
savings in these fields.
First, take the item of highway expenditures. Prior
to the depression, the Federal grants to the States for
public highway construction regularly ran under one hundred
million dollars annually. This year the total Federal outlays
for highways, inclusive of emergency expenditures, are
estimated at two hundred fifty-three millions; and, in
addition, the existing highway programs call for new
101
- 11 -
appropristions totaling more than four hundred million dollars
for the next two years. I believe it is now time to return
to the average annual level of highway expenditures that
existed prior to the depression, especially because during the
past few years many other millions of dollars have been spent
for highways out of relief appropriations.
Second, there is the field of public works, other than
highways, on which we are spending five hundred seventy-three
millions this year. This is a greater sum than the total
that was spent for this purpose during the entire five-year
period between 1926 and 1930, inclusive. Next year, despite
the fact that available unspent appropriations for this
purpose already exceed six hundred millions, I believe that
we can and should move definitely toward a lower level of
public works outlays.
Third, I hope that employment conditions will make
possible a further substantial reduction in our outlays for
102
- 12 -
unemployment relief and the C.C.C. camps. During the present
fiscal year, by reason of more active private business, these
expenditures are already being reduced by some seven hundred
eighty millions below last year's.
I turn next to our expenditures on behalf of agriculture.
The total of this year's expenditures, exclusive of public
highways, for the regular activities of the department, the
soil conservation program, rural electrification, resettlement,
commodity loans, and lower interest rates for Federal land
bank borrowers, exceeds nine hundred million dollars.
Despite the magnitude of this sum, you are all aware that
possible further measures involving large additional
expenditures are now being discussed.
I am strongly in favor of a long-range program to
maintain the independence and the purchasing power of the
farmer. Such a program must take into consideration the
farmer's opportunities in the foreign markets 86 well as
103
- 13 -
in those at home; and no agricultural program can long
endure which makes excessive demands upon the Federal Treasury,
or is unfair to consumers. The farmer himself does not want
subsidies, but rather such fair prices and such balanced
production of crops as will make subsidies unnecessary for
his decent economic status.
Balancing the budget is in the interest of our
agricultural as well as of other parts of our population;
and it requires the cooperation of the farmer 88 well as
other sections of the public.
Only with the solid support of the public can we hope
to achieve economies totaling seven hundred millions in
the four fields that I have cited.
There may be some persons who would counsel a more
drastic reduction of expenditures or a program of far
104
INSERT - Page 14
Obviously, however, one reaches a point in reducing
Government expenditures at which no further reductions can
be made, unless it is decided completely to abandon many
governmental activities -- in other words, unless it is de-
cided to make drastic changes in national policy. For
example, it would mean consideration of such things as weaken-
ing our national defense, slowing up or abandoning flood
control, soil erosion prevention, and security for the aged
and unemployed. Such a course, I believe, would not have
the approval of either the American people or their elected
representatives in Congress.
105
- 14 N
heavier taxation in order to make certain a more substantial
reduction in the public debt in the next fiscal year. There
are serious objections to either of these courses.
I have already indicated that I believe it undesirable
to increase taxation. There are equally compelling reasons
why we should not reduce expenditures too suddenly and too
drastically. I strongly favor 8. vigorous program for the
progressive reduction of Federal expenditures to the minimum
demanded by the Government's responsibilities. (INSERT)
Moreover, it would clearly be disastrous to many of the
needy unemployed, and disruptive to many sections of private
industry, if we were to out Government expenditures in the
coming fiscal year by much more than the amount I have indicated,
We are definitely in a transition period between
unbalanced and balanced Federal budgets; but I firmly
believe that there 18 Just as much danger to our economy
106
- 15 -
as 8 whole in moving too rapidly in this direction as there
would be in not moving at all.
Relatively few persons realize the striking fact
that the net improvement this year in the budgetary position
of the Federal Government 8.8 estimated will amount to more than
two billion dollars. In other words, the net deficit this year
is estimated at less than seven hundred million as compared
with more than twenty-seven hundred millions last year.
This net improvement of more than two billion dollars
in 8. single year provides the best answer to those who, in
most cases ignorant of the true facts, have publicly despaired
of our ability to balance the Federal budget.
Much of this year's anticipated budgetary improvement
comes" from increased revenue, but we are supplementing this
by also seeking reductions in expenditures.
107
- 16 -
In addition to these considerations, I should like
to point out that, as a result of the Social Security Act
and related State laws, it is estimated that the Federal
Government next year will receive more than one billion
dollars net for investment in Government securities for
the Unemployment Trust Fund and the Old-Age Reserve Account.
Although this investment will not change the total amount of
the public debt, it will with a balanced budget result in the
transfer to these reserve accounts of more than & billion
dollars of Government obligations now held by private investors.
Even during the decade of the Twenties, when the
Treasury was receiving large payments of interest and
principal on war debts, and from the sale of surplus war
materials, the maximum reduction made in any single year in
the public debt held by private investors was one billion
three hundred millions. The rate at which it is safe to
108
- 17 -
reduce the public debt in private hands depends upon the
rate at which private funds flow into investment channels.
It is unsafe to go too fast.
Although we are not contemplating any increase
in the total tax burden, the character of our tax structure
1s being given earnest consideration.
The Federal tax system affects everyone in the
country. We in the Treasury in studying tax problems have
two objectives always before us: First, that the tax burden
shall be distributed as fairly as possible, and second, that
the collection of taxes shall be as little burdensome to the
taxpayer as possible.
It is with these aims that, by direction of the
President, we have been reviewing the whole tax structure
in the last few months and are just now in the process of
presenting to & committee of Congress the information we
109
- 18 -
have collected. The study has not been directed toward
raising additional revenue. Instead, we have sought
to determine whether there are inequalities and injustices
in the distribution of the tax burden and whether there are
some taxes whose cost of collection and whose burdensome effect
outweigh the revenue gain. In addition, we want to
simplify collection and make the texpayer's record-keeping
less difficult.
We realize that our tax laws are too complicated; we
want to make them less 80. We realize that there are
inequities; we want to eliminate as many of them as we can.
In making this study, we have invited the assistance
and the advice of groups of taxpayers and of individuals,
We want to hear the taxpayer's side of the story. We want
all the facts we can get and we have obtained both facts
and opinions.
110
- 19 -
Our tax revenues come largely from individual eernings
and business profits. We do not wish to impose levies
which tend to dry up the sources of tax revenue, The laws
should be so written and administered that the taxpayer can
continue to make a reasonable profit with 8 minimum of
interference from his own Federal Government; provided that
the taxpayer cooperates with his Government in carrying out
the purpose and the spirit of the tax laws. Of course, tax
policy cannot properly be determined from exceptional cases.
We must look at the whole picture. We base our decisions on
extensive information and upon analysis of actual tax records.
The amount of our income-tax revenue 18 only about
half our total internal revenue. Less than three million
people out of our total population pay income taxes. We
would be applying the principle of capacity to pay more
justly if we were to reduce the number of consumer taxes
and at the same time to increase the number of income tax
111
- 20 -
payers. Taxpayers who are squarely confronted with their
own tax burdens are bound to be keenly alive to the way
the money 1s being spent by their Government.
The budget now nearing completion 1s predicated on a
definite estimate of receipts, based on the existing tax
structure. It 18 a cardinal point of our policy that the
tax system, as revised, must not yield a smaller return for
1939 than the present system would yield.
We want to adjust inequalities and remedy defects in
the tax laws. In doing this, we have sought the help of
the taxpayer and have given him a sympsthetic hearing. If
we find that the operation of any particular tax is unfair,
we stand ready to say 80 publicly.
My object this evening has been to present, as clearly
and as frankly as I know how, a comprehensive picture of
112
- 21 -
Federal expenditures and the budgetary outlook. I have tried
to make plain the underlying economic reasons, as well as
the humanitarian ones, for the past deficits; and I have
tried to bring out clearly the considerations that now
demand further definite steps toward a balanced Federal
budget. I have shown why, in my opinion, this balance
should be sought by a reduction in expenditures without an
increase in the total of the tax burden.
The principal aims of our budgetary policy have been,
and I hope will continue to be, to promote a high level
and healthy character of business activity, a maximum volume
of employment at good wages in private industry, a reasonable
return to capital and enterprise, fair treatment for our
agricultural population, and adequate revenues to meet the
services now demanded of the Federal Government.
Regraded Unclassifie
22-a
113
The attainment of these ends demands the cooperation
of private business. This Administration is going to do
everything possible to promote the continuation of business
recovery and to balance the budget by reducing expenditures.
But, in any event, this Administration will let no one
starve. We are confident that, with the full cooperation
of the business world, our present difficulties will be
speedily overcome; and that the aims that I have set forth
above, which are properly those of private business no less
than those of the National Government, will be achieved.
114
22-b
The attainment of these ends rests as much on private
initiative and on the cooperation of private enterprise as
it does upon any efforts which the Government can put forth.
This Administration is going to do everything possible to
promote a continuation of recovery and to balance the budget
through cutting expenditures. However, business has to do
its share. Should business fail to do its share or should
the combined efforts of Government and business not attain
the full effect that we hope for, this Administration is
not going to let the needy starve.
But we are confident that, with the full cooperation
of the business world, our present difficulties will be
speedily overcome.
#16
16
115
Address of the Secretary of the Treasury, to be
Delivered before the Academy of Political Science,
at the Hotel Astor, New York City, Wednesday Evening
November 10, 1937
I welcome the opportunity to discuss before the members
and guests of the Academy of Political Science the subject
of Federal spending and its relation to the balancing of the
Federal budget.
Nineteen years ago tomorrow, we signed the Armistice
ending the World War. That war was enormously costly in
human values, and it was enormously costly in material
values. In the two years between the middle of 1917 and
the middle of 1919, the Federal Government sustained a net
deficit of twenty-two billion dollars.
During the past four years, this country has been
engaged in another war. This time our enemy was a great
economic disaster. In this war, we fought with jobs and
116
- 2 -
with dollars to save farmers from losing their farms; to
save home owners from losing their homes; to give not only
:
bread but work to the unemployed; to increase the security
of jobs, property values, and business profits; to bring
order out of chaos in our economic system.
This war, like that other war, required a many-sided
campaign under intelligent and courageous leadership -- a.
leadership that was magnificently supplied by President
Roosevelt.
Finally, this war, like that other war, required a
large spending program. This program, plus the special
needs arising out of the great drought and the prepayment
of the soldiers' bonus, necessitated net outlays during the
four years ended June 30, 1937, of some fourteen billion
dollars in excess of our receipts.
117
- 3 -
We deliberately used an unbalanced Federal budget
during the past four years to meet & great emergency.
That policy has succeeded. The emergency that we faced
in 1933 no longer exists.
I am fully aware that many of our problems remain
unsolved. I am aware that there still remains a considerable
volume of unemployment; that the speculative markets have
recently been under severe pressure; and that our business
indexes have recently shown a declining tendency. I am
further aware that some persons contend that another great
spending program 18 desirable to ward off the risk of
another business depression.
I claim no prophetic insight into the future. But,
after giving serious and careful consideration to all these
and other factors, I have reached the firm conviction that
the domestic problems which face us today are essentially
118
- 4 -
different from those which faced us four years ago. Many
measures are required for their solution. One of these
measures, but only one, in the present juncture is a
determined movement toward 8. balanced budget.
Early in 1933, after three years of progressive
deterioration, our whole economic mechanism was demoralized.
Under these conditions, there was no agency outside of the
Federal Government with the resources and the courage to
bring about a business revival.
Today the situation is greatly changed. We are now
nearing the end of one of the most active years in the
business history of this country. On the whole, this
high level of activity has been of a healthy character --
not of the character that usually marks an unhealthy boom
and precedes a serious depression. The present situation
is not characterized by the existence of huge inventories,
119
- 5 -
high interest rates, over-extended credit positions, or
great surpluses of housing and canital equipment. We
have not reached the stage of full employment of our
productive resources, On the contrary, from all these
standpoints, conditions are favorable for a continued
increase in the level of business activity.
This stands in contrast to the unhealthy excesses
of 1929. It stands in even sharper contrast to the banking
collanse, the bread lines, the bankruntcies, and the general
demoralization of 1933.
Despite the substantial increase in the public debt
during the past four years, the credit of the Federal
Government has remained absolutely unimpaired. Not once
during even the darkest days of the depression did the
Treasury experience the slightest difficulty in borrowing
all the funds that were required. Moreover, the rates of
120
- 6 -
interest on our borrowings have been lower, for comparable
securities, than at any other time in the history of the
country.
But the underlying conditions that made deliberate
deficit spending the wisest kind of policy during the
depression have been altered during the progress of recovery.
Thus, when we borrowed during the depression to finance our
deficit spending, a large nart of the funds was obtained
through an expansion of bank credit. To this extent, our
spending did not absorb capital funds that might otherwise
have gone into private industry, nor did it absorb by
taxation funds that might otherwise have gone into private
consumption. Even to the extent that our bonds and notes
were purchased by non-banking investors, the effect was
largely to put to work canital funds that would otherwise
have remained idle.
121
- 7 -
Our industrial recovery of the last year, however,
has created large new demands for private capital. Our
commercial banks have been again utilizing their credit
resources for the financing of private industry. During
the present calendar year, the insured commercial banks of
the country have substantially reduced their holdings of
Government securities in order to meet actual and prospective
demands for commercial credit. The obligations that they
sold, plus an amount equal to the securities newly marketed
by the Treasury, were purchased by investors. Any deficit
spending under conditions of active demand for private
canital would have to be financed in large part by capital
funds that would otherwise be available for business
purposes.
The basic need today is to foster the full
application of the driving force of private capital.
We want to see capital go into the productive
122
- 8 -
channels of private industry. We want to see private
business expand. We believe that much of the remaining
unemployment will disappear as private capital funds are
increasingly employed in productive enterprises. We
believe that one of the most important ways of achieving
these ends at this time is to continue progress toward a
balance of the Federal budget.
I turn now to the immediate practical aspects of
budget balancing for the coming fiscal year. What are
the controlling figures?
Our total receipts for this year were estimated in the
President's budget summation of October 19 at about six
billion six hundred fifty millions, and our total net
expenditures at about seven billion three hundred forty-six
millions, leaving an estimated net deficit of about seven
hundred millions.
123
- 9 -
To attain an ordinary balancing of the budget next
year -- that 1s, a balance after full provision for accruing
liabilities for old-age benefit payments, but exclusive of
debt retirement --, it would therefore be necessary to
accomplish a net improvement of seven hundred million
dollars in our budgetary position, as last estimated. To
be prudent, we should not count on an increase in revenues
next year from the existing tax structure. Nor should we
impose additional taxation. Instead, we should plan to
bring next year's expenditures within this year's income.
But where can cuts totaling seven hundred millions
be made? After careful study of the whole problem, I have
come to the following conclusions: On the one hand, while
everything possible 1s being and will be done to keep a
tight rein on the regular operating expenses of the Federal
124
- 10 -
Government, including the national defense and interest
on the public debt, I do not believe that we can find
large savings in this field. Further, our expenditures
under the Social Security Act will increase next year.
On the other hand, by focusing attention on the several
classes of expenditures that have been mainly responsible
for our past deficits -- public highways, public works,
unemployment relief, and agriculture --, it is apparent
that great savings can be made.
Let me give you an idea of the possibilities for
savings in these fields.
First, take the item of highway expenditures. Prior
to the depression, the Federal grants to the States for
public highway construction regularly ran under one hundred
million dollars annually. This year the total Federal
outlays for highways, inclusive of emergency expenditures,
125
- 11 -
are estimated at two hundred fifty-three millions; and, in
addition, the existing highway programs call for new
appropriations totaling more than four hundred million dollars
for the next two years. I believe it is now time to return
to the average annual level of highway expenditures that
existed prior to the depression, especially because during
the past few years many other millions of dollars have been
spent for highways out of relief appropriations.
Second, there is the field of public works, other than
highways, on which we are spending five hundred seventy-three
millions this year. This 18 a greater sum than the total
that was spent for this purpose during the entire five-year
period between 1926 and 1930, inclusive. Next year, despite
the fact that available unspent appropriations for this
purpose already exceed six hundred millions, I believe that
we can and should move definitely toward a lower level of
public works outlays.
126
- 12 -
Third, I sincerely hope that employment conditions will
make possible a further substantial reduction in our outlays
for unemployment relief and the C.C.C. camps. During the
present fiscal year, by reason of more active private
business, these expenditures are already being reduced by
some seven hundred and eighty millions below last year's.
I turn next to our expenditures on behalf of agriculture.
The total of this year's expenditures, exclusive of public
highways, for the regular activities of the department, the
soil conservation program, rural electrification, resettlement,
commodity loans, and lower interest rates for Federal land
bank borrowers, exceeds nine hundred million dollars.
Despite the magnitude of this sum, you are all aware that
possible further measures involving large additional
expenditures are now being discussed.
127
- 13 -
I am strongly in favor of a long-range program to
maintain the independence and the purchasing power of the
farmer. Such a program must take into consideration the
farmer's opportunities in the foreign markets as well as
in those at home; and no agricultural program can long
endure which makes excessive demands upon the Federal Treasury,
or 1s unfair to consumers. The farmer himself does not want
subsidies, but rather such fair prices and such balanced
production of crops as will make subsidies unnecessary for
his decent economic status.
Balancing the budget 1s as much in the interest of
farmers as in the interest of other parts of our population;
and It requires the cooperation of the farmer as well as of
other sections of the public.
128
- 14 -
Only with the solid backing of the public can we
hone to achieve economies totaling seven hundred millions
in the four fields that I have cited.
There may be some persons who would counsel a more
drastic reduction of expenditures or a program of far
heavier taxation in order to make certain a more substantial
reduction in the public debt in the next fiscal year. There
are serious objections to either of these courses.
I have already indicated that I believe it undesirable
to increase taxation. There are equally compelling reasons
why we should not reduce expenditures too suddenly and too
drastically. I strongly favor a vigorous program for the
progressive reduction of Federal expenditures to the minimum
demanded by the Government's responsibilities.
129
- 15 -
Obviously, however, one reaches a point in reducing
Government expenditures at which no further reductions can
be made, unless it 1s decided to crinnle many essential
governmental activities -- in other words, unless it 1s
decided to make drastic changes in national policy. For
example, it would mean consideration of such things as
weakening our national defense, and slowing up or abandoning
flood control, soil erosion prevention, and relief for the
aged and the unemployed. Such a course, I believe, would
not have the approval of either the American people or
their elected representatives in Congress.
Moreover, it would clearly be disastrous to many of
the needy unemployed, and disruntive to many sections of
private industry, if we were to cut Government expenditures
in the coming fiscal year by much more than the amount I
have indicated.
130
- 16 -
We are definitely in a transition period between
unbalanced and balanced Federal budgets; but I firmly
believe that there is just as much danger to our economy
as a whole in moving too rapidly in this direction as there
would be in not moving at all.
Relatively few persons realize the striking fact that
the net improvement this year in the budgetary position of
the Federal Government as estimated will amount to more than
two billion dollars. In other words, the net deficit this
year 1e estimated at less than seven hundred millions as
compared with more than two billion seven hundred millions
last year.
This net improvement of more than two billion dollars
in R single year provides the best answer to those who, in
most cases ignorant of the true facts, have publicly
despaired of our ability to balance the Federal budget.
131
- 17 -
True, much of this year's anticipated budgetary
improvement comes from increased revenue, but we are
supplementing this by also seeking reductions in expenditures.
In addition to these considerations, I should like
to point out that, as a result of the Social Security Act
and related State laws, it 1s estimated that the Federal
Government next year will receive more than one billion
dollars net for investment in Government securities for the
Unemployment Trust Fund and the Old-Age Reserve Account.
Although this investment will not change the total amount of
the public debt, it will with 8. balanced budget result in
the transfer to these reserve accounts of more than a billion
dollars of Government obligations now held by private
investors.
Even during the decade of the Twenties, when the
Treasury was receiving large payments of interest and
132
- 18 -
principal on war debts, and from the sale of surplus war
materials, the maximum reduction made in any single year in
the public debt held by private investors was one billion
three hundred fifty millions. The rate at which it is safe
to reduce the public debt in private hands depends upon the
rate at which private funds flow into investment abannels.
It is unsafe to go too fast.
Although we are not contemplating any increase in the
total tax burden, the character of our tax structure is
being given earnest consideration.
The Federal tax system affects every one in the
country. We in the Treasury in studying tax problems have
two objectives always before us: First, that the tax burden
shall be distributed as fairly 8.8 possible, and second, that
the collection of taxes shall be as little burdensome to
the taxpayer 8.8 possible.
133
- 19 -
It 18 with these aims that, by direction of the
President, we have been reviewing the whole tax structure
in the last few months and are just now in the process of
:
presenting to a committee of Congress the information we
have collected. The study has not been directed toward
raising additional revenue. Instead, we have sought to
determine whether there are inequalities and injustices in
the distribution of the tax burden and whether there are
some taxes whose cost of collection and whose burdensome
effect outweigh the revenue gain. In addition, we want to
simplify collection and make the taxpayer's record-keeping
less difficult.
We realize that our tax laws are too complicated; we
want to make them less SO. We realize that there are
inequities; we want to eliminate as many of them 8.8 we can.
134
- 20 -
In making this study, we have invited the assistance
and the advice of groups of taxpayers and of individuals.
We want to hear the taxpayer's side of the story. We want
all the facts we can get and we have obtained both facts
and opinions.
Our tax revenues come largely from individual earnings
and business profits. We do not wish to impose levies
which tend to dry up the sources of tax revenue. The laws
should be so written and administered that the taxpayer can
continue to make 8. reasonable profit with a minimum of
interference from his own Federal Government; provided that
the taxpayer cooperates with his Government in carrying out
the purpose and the spirit of the tax laws. Of course,
tax policy cannot properly be determined from exceptional
cases. We must look at the whole picture. We base our
decisions on extensive information and upon analysis of
actual tax records.
135
- 21 -
The amount of our income-tax revenue 1s only about
half our total internal revenue. Less than three million
people out of our total population Day individual Federal
income taxes. We would be applying the principle of
capacity to pay more justly if we were to reduce the number
of consumer taxes and at the same time to increase the number
of income tax payers. Taxpayers who are squarely confronted
with their own tax burdens are bound to be keenly alive to
the way the money 1s being spent by their Government.
The budget now nearing completion is predicated on a
definite estimate of receipts, based on the existing tax
structure. It is a cardinal point of our policy that the
tax system, 8.8 revised, must not yield a smaller return for
1939 than the present system would vield.
We want to adjust inequalities and remedy defects in
the tax laws. In doing this, we have sought the help of
136
- 22 -
the taxpayer and have given him 8 sympathetic hearing. If
we find that the operation of any particular tax is unfair,
we stand ready to say so publicly.
My object this evening has been to present, as clearly
and 8.S frankly 8.8 I know how, a comprehensive picture of
Federal expenditures and the budgetary outlook. I have tried
to make plain the underlying economic reasons, as well as
the humanitarian ones, for the past deficits; and I have
tried to bring out clearly the considérations that now
demand further definite steps toward a balanced Federal
budget. I have shown why, in my opinion, this balance
should be sought by a reduction in expenditures without an
increase in the total of the tax burden. But I have also
shown that there is a limit to reductions and that balancing
of budgets needs the help of industry to keep up total tax
137
- 23 -
receipts unless we are again to resort to deficit financing.
The principal aims of our budgetary policy have been,
and I hope will continue to be, to promote a high level
and healthy character of business activity, a maximum
volume of employment at good wages in private industry, a
reasonable return to canital and enterprise, fair treatment
for our agricultural population, and adequate revenues to
meet the services now demanded of the Federal Government.
The attainment of these ends rests very greatly on
private initiative and on the cooperation of private
enterprise. This 18 a necessary supplement to any efforts
which the Government can put forth. This Administration
is going to do everything possible to promote a continuation
of recovery and to balance the budget through cutting
expenditures. But I wish to emphasize that in no event
will this Administration allow anyone to starve, nor will
138
- 24 -
it abandon its broad purpose to protect the weak, to
give human security and to seek a wider distribution of
our national income. We are confident that, with the
full cooperation of the business world, our present
difficulties will be overcome; and that the aims that
I have set forth above, which are properly those of
private business as well as those of the National
Government, will be achieved.
# 17
139
Address of the Secretary of the Treasury, to be
Delivered before the Academy of Political Science,
at the Hotel Astor, New York City, Wednesday Evening,
November 10, 1937
I welcome the opportunity to discuss before the members
and guests of the Academy of Political Science the subject
of Federal spending and its relation to the balancing of the
Federal budget.
Nineteen years ago tomorrow, we signed the Armistice
ending the World War. That war was enormously costly in
human values, and it was enormously costly in material
values. In the two years between the middle of 1917 and
the middle of 1919, the Federal Government sustained a net
deficit of twenty-two billion dollars.
During the past four years, this country has been
engaged in another war, This time our enemy was a great
economic disaster. In this war, we fought with jobs and
140
- 2 -
with dollars to save farmers from losing their farms; to
save home owners from losing their homes; to give not only
bread but work to the unemployed; to increase the security
of jobs, property values, and business profits; to bring
order out of chaos in our economic system.
This war, like that other war, required a many-sided
campaign under intelligent and courageous leadership - a
leadership that was magnificently supplied by President
Roosevelt.
Finally, this war, like that other war, required a
large spending program. This program, plus the special
needs arising out of the great drought and the prepayment
of the soldiers' bonus, necessitated net outlays during the
four years ended June 30, 1937, of some fourteen billion
dollars in excess of our receipts.
Regraded
141
INSERT
Of course, it is easily possible to criticize some of
the detailed uses of the relief funds. Let us concede that
there was some waste. In any expenditure program of such
magnitude this is inevitable. But contrasted with the
human and material values at stake, such waste as may have
occurred shrinks to insignificance.
Regraded Unclassified
142
- 3 -
We deliberately used an unbalanced Federal budget
during the past four years to meet a great emergency.
That policy has succeeded. The emergency that we faced
in 1933 no longer exists.
I am fully aware that many of our problems remain
unsolved. I am aware that there still remains a considerable
volume of unemployment; that the speculative markets have
recently been under severe pressure; and that our business
indexes have recently shown a declining tendency. I am
further aware that some persons contend that another great
spending program is desirable to ward off the risk of
another business depression.
I claim no prophetic insight into the future. But,
after giving serious and careful consideration to all these
and other factors, I have reached the firm conviction that
the domestic problems which face us today are essentially
Regraded Unclassified
143
- 4 -
different from those which faced us four years ago. Many
measures are required for their solution. One of these
measures, but only one, in the present juncture is a
determined movement toward a balanced budget.
Early in 1933, after three years of progressive
deterioration, our whole economic mechanism was demoralized,
Under these conditions, there was no agency outside of the
Federal Government with the resources and the courage to
bring about 8. business revival.
Today the situation is greatly changed. We are now
nearing the end of one of the most active years in the
business history of this country. On the whole, this
high level of activity has been of a healthy character -
not of the character that usually marks an unhealthy boom
and precedes a serious depression. The present situation
18 not characterized by the existence of huge inventories,
Regraded Unclassified
144
- 5 -
high interest rates, over-extended credit positions, or
great surpluses of housing and capital equipment. We
have not reached the stage of full employment of our
productive resources. On the contrary, from all these
standpoints, conditions are favorable for a continued
increase in the level of business activity.
This stands in contrast to the unhealthy excesses
of 1929. It stands in even sharper contrast to the banking
collapse, the bread lines, the bankruptcies, and the general
demoralization of 1933.
Despite the substantial increase in the public debt
during the past four years, the credit of the Federal
Government has remained absolutely unimpaired. Not once
during even the darkest days of the depression did the
Treasury experience the slightest difficulty in borrowing
all the funds that were required. Moreover, the rates of
Regraded Unclassified
145
- 6 -
interest on our borrowings have been lower, for comparable
securities, than at any other time in the history of the
country.
But the underlying conditions that made deliberate
deficit spending the wisest kind of policy during the
depression have been altered during the progress of recovery.
Thus, when we borrowed during the depression to finance our
deficit spending, a large part of the funds was obtained
through an expansion of bank credit. To this extent, our
spending did not absorb capital funds that might otherwise
have gone into private industry, nor did it absorb by
taxation funds that might otherwise have gone into private
consumption. Even to the extent that our bonds and notes
were purchased by non-banking investors, the effect was
largely to put to work capital funds that would otherwise
have remained idle.
Regraded 1 Inclassified
146
- 7 -
Our industrial recovery of the last year, however,
has created large new demands for private capital. Our
commercial banks have been again utilizing their credit
resources for the financing of private industry. During
the present calendar year, the insured commercial banks of
the country have substantially reduced their holdings of
Government securities in order to meet actual and prospective
demands for commercial credit. The obligations that they
sold, plus an amount equal to the securities newly marketed
by the Treasury, were purchased by investors. Any deficit
spending under conditions of active demand for private
capital would have to be financed in large part by capital
funds that would otherwise be available for business
purposes.
The basic need today is to foster the full application
of the driving force of private capital. We want to see
Regraded Unclassified
147
- 8 -
capital go into the productive channels of private industry.
We want to see private business expand. We believe that
much of the remaining unemployment will disappear as private
capital funds are increasingly employed in productive
enterprises. We believe that one of the most important
ways of achieving these ends at this time is to continue
progress toward a balance of the Federal budget.
I turn now to the immediate practical aspects of
budget balancing for the coming fiscal year. What are
the controlling figures?
Our total receipts for this year were estimated in the
President's budget summation of October 19 at about six
billion six hundred fifty millions, and our total net
expenditures at about seven billion three hundred forty-five
millions, leaving an estimated net deficit of six hundred
ninety-five millions.
Regraded Unclassified
148
- 9 -
To attain an ordinary balancing of the budget next
year -- that 18, a balance after full provision for accruing
liabilities for old-age benefit payments, but exclusive of
debt retirement --, it would be necessary to accomplish a
net improvement of about seven hundred million dollars in
our budgetary position, as last estimated. To be prudent,
we should not count on an increase in revenues next year
from the existing tax structure. Nor should we impose
additional taxation. Instead, we should plan to bring next
year's expenditures within this year's income.
But where can cuts totaling seven hundred millions
be made? After careful study of the whole problem, I have
come to the following conclusions: On the one hand, while
everything possible is being and will be done to keep 8.
tight rein on the regular operating expenses of the Federal
Regraded Unclassified
149
- 10 -
Government, including the national defense and interest
on the public debt, I do not believe that we can find
large savings in this field. Further, our expenditures
under the Social Security Act will increase next year.
On the other hand, by focusing attention on the several
classes of expenditures that have been mainly responsible
for our past deficits -- public highways, public works,
unemployment relief, and agriculture --, it is apparent
that great savings can be made.
Let me give you an idea of the possibilities for
savings in these fields.
First, take the item of highway expenditures. Prior
to the depression, the Federal grants to the States for
public highway construction generally ran under one hundred
million dollars annually. This year the total Federal
outlays for highways, inclusive of emergency expenditures,
Regraded Unclassifie
150
- 11 -
are estimated at two hundred fifty-three millions; and, in
addition, the existing highway programs call for new
appropriations totaling more than four hundred million dollars
for the next two years. I believe it is now time to return
to the average annual level of highway expenditures that
existed prior to the depression, especially because during
the past few years many other millions of dollars have been
spent for highways out of relief appropriations.
Second, there is the field of public works, other than
highways, on which we are spending five hundred seventy-three
millions this year. This is a greater sum than the total
that was spent for this purpose during the entire five-year
period between 1926 and 1930, inclusive. Next year, despite
the fact that there will be available from appropriations
already made for this purpose about six hundred millions, I
believe that we can and should move definitely toward a. lower
level of public works outlays.
Regraded Unclassifie
151
- 12 -
Third, I sincerely hope that employment conditions will
make possible a further substantial reduction in our outlays
for unemployment relief and the C.C.C. camps. During the
present fiscal year, by reason of more active private
business, these expenditures are already being reduced by
more than seven hundred and fifty millions below last year's.
I turn next to our expenditures on behalf of agriculture.
The total of this year's expenditures, exclusive of public
highways, for the regular activities of the department, the
soil conservation program, rural electrification, resettlement,
commodity loans, and lower interest rates for Federal land
bank borrowers, exceeds nine hundred million dollars.
Despite the magnitude of this sum, you are all aware that
possible further measures involving large additional
expenditures are now being discussed.
Regraded Unclassifie
152
- 13 -
I am strongly in favor of 8 long-range program to
maintain the independence and the purchasing power of the
farmer. Such a program must take into consideration the
farmer's opportunities in the foreign markets as well as
in those at home; and no agricultural program can long
endure which makes excessive demands upon the Federal
Treasury, or is unfair to consumers. The farmer himself
does not want subsidies, but rather such fair prices and
such balanced production of crops as will make subsidies
unnecessary for his decent economic status.
Balancing the budget is as much in the interest of
farmers as in the interest of other parts of our
population; and it requires the cooperation of the farmer
as well as of other sections of the public.
Regraded
153
- 14 -
Only with the solid backing of the public can we
hope to achieve economies totaling seven hundred millions
in the four fields that I have cited.
There may be some persons who would counsel a more
drastic reduction of expenditures or a program of far
heavier taxation in order to make certain a more substantial
reduction in the public debt in the next fiscal year. There
are serious objections to either of these courses.
I have already indicated that I believe it undesirable
to increase taxation. There are equally compelling reasons
why we should not reduce expenditures too suddenly and too
drastically. I strongly favor 8. vigorous program for the
progressive reduction of Federal expenditures to the
minimum demanded by the Government's responsibilities.
Regraded Unclassified
154
- 15 -
Obviously, however, one reaches a point in reducing
Government expenditures at which no further reductions can
be made, unless it is decided to cripple many essential
governmental activities -- in other words, unless it is
decided to make drastic changes in national policy. For
example, it would mean consideration of such things as
weakening our national defense, and slowing up or abandoning
flood control, soil erosion prevention, and relief for the
aged and the unemployed. Such a course, I believe, would
not have the approval of either the American people or
their elected representatives in Congress.
Moreover, it would clearly be disastrous to many of
the needy unemployed, and disruptive to many sections of
private industry, if we were to out Government expenditures
in the coming fiscal year by much more than the amount I
have indicated.
Regraded Unclassified
155
- 16 -
We are definitely in a transition period between
unbalanced and balanced Federal budgets; but I firmly
believe that there is Just as much danger to our economy
as a whole in moving too rapidly in this direction 8.8 there
would be in not moving at all,
Relatively few persons realize the striking fact that
the net improvement this year in the budgetary position of
the Federal Government as estimated will amount to more
than two billion dollars. In other words, the net deficit
this year is estimated at less than seven hundred millions
as compared with more than two billion seven hundred millions
last year.
This net improvement of more than two billion dollars
in a single year provides the best answer to those who, in
most cases ignorant of the true facts, have publicly
despaired of our ability to balance the Federal budget.
Regraded Unclassified
156
- 17 -
True, much of this year's anticipated budgetary
improvement comes from increased revenue, but we are
supplementing this by also seeking reductions in expenditures.
In addition to these considerations, I should like
to point out that, as a result of the Social Security Act
and related State laws, it is estimated that the Federal
Government next year will receive more than one billion
dollars net for investment in Government securities for the
Unemployment Trust Fund and the Old-Age Reserve Account.
Although this investment will not change the total amount
of the public debt, it will with a balanced budget result
in the transfer to these reserve accounts of more than a
billion dollars of Government obligations now held by
private investors.
Even during the decade of the Twenties, when the
Treasury was receiving large payments of interest and
Regraded Unclassified
157
- 18 -
principal on war debts, and from the sale of surplus war
materials, the maximum reduction made in any single year in
the public debt held by private investors was about one
billion three hundred millions. The rate at which it is
safe to reduce the public debt in private hands depends upon
the rate at which private funds flow into investment channels.
It is unsafe to go too fast.
Although we are not contemplating any increase in the
total tax burden, the character of our tax structure 18
being given earnest consideration.
The Federal tax system affects every one in the country.
We in the Treasury in studying tax problems have two
objectives always before us: First, that the tax burden
shall be distributed as fairly as possible, and second, that
the collection of taxes shall be as little burdensome to
the taxpayer as possible.
Regraded Unclassified
158
- 19 -
It is with these aims that, by direction of the
President, we have been reviewing the whole tax structure
in the last few months and are just now in the process of
presenting to a committee of Congress the information we
have collected. The study has not been directed toward
raising additional revenue. Instead, we have sought to
determine whether there are inequalities and injustices in
the distribution of the tax burden and whether there are
some taxes whose cost of collection and whose burdensome
effect outweigh the revenue gain. In addition, we want to
simplify collection and make the taxpayer's record-keeping
less difficult.
We realize that our tax laws are too complicated; we
want to make them less 80. We realize that there are
inequities; we want to eliminate as many of them as we can.
Regraded Unclassified
159
- 20 -
In making this study, we have invited the assistance
and the advice of groups of taxpayers and of individuals.
We want to hear the taxpayer's side of the story. We want
all the facts we can get and we have obtained both facts
and opinions.
Our tax revenues come largely from individual earnings
and business profits. We do not wish to impose levies which
tend to dry up the sources of tax revenue. The laws should
be so written and administered that the taxpayer can continue
to make a reasonable profit with a minimum of interference
from his own Federal Government; provided that the taxpayer
cooperates with his Government in carrying out the purpose
and the spirit of the tax laws. Of course, tax policy cannot
properly be determined from exceptional cases. We must look
at the whole picture. We base our decisions on extensive
information and upon analysis of actual tax records.
Regraded Unclassified
180
- 21 -
The amount of our income-tax revenue is only about
half our total internal revenue. Less than three million
people out of our total population pay individual Federal
income taxes. We would be applying the principle of
capacity to pay more Justly if we were to reduce the number
of consumer taxes and at the same time to increase the number
of income tax payers. Taxpayers who are squarely confronted
with their own tax burdens are bound to be keenly alive to
the way the money is being spent by their Government.
The budget now nearing completion is predicated on a
definite estimate of receipts, based on the existing tax
structure. It is a cardinal point of our policy that the
tax system, as revised, must not yield a smaller return for
1939 than the present system would yield.
We want to adjust inequalities and remedy defects in
the tax laws. In doing this, we have sought the help of
Regraded Unclassified
161
- 22 -
the taxpayer and have given him a sympathetic hearing. If
we find that the operation of any particular tax 1s unfair,
we stand ready to say 80 publicly.
My object this evening has been to present, as clearly
and as frankly 8.8 I know how, a comprehensive picture of
Federal expenditures and the budgetary outlook. I have
tried to make plain the underlying economic reasons, as
well as the humanitarian ones, for the past deficits; and
I have tried to bring out clearly the considerations that
now demand further definite steps toward 8. balanced Federal
budget. I have shown why, in my opinion, this balance
should be sought by a reduction in expenditures without an
increase in the total of the tax burden. But I have also
shown that there is a limit to reductions; and that
balancing of budgets needs the help of industry to keep up
Regraded
162
- 23 -
total tax receipts unless we are again to resort to deficit
financing.
The principal aims of our budgetary policy have been,
and I hope will continue to be, to promote a high level
and healthy character of business activity, 8. maximum
volume of employment at good wages in private industry, a
reasonable return to capital and enterprise, fair treatment
for our agricultural population, and adequate revenues to
meet the services now demanded of the Federal Government.
The attainment of these ends rests very greatly on
private initiative and on the cooperation of private
enterprise. This is a necessary supplement to any efforts
which the Government can put forth. This Administration
18 going to do everything possible to promote a continuation
of recovery and to balance the budget through cutting
expenditures. But I wish to emphasize that in no event
Regraded Unclassified
163
- 24 -
will this Administration allow anyone to starve, nor will
it abandon its broad purpose to protect the weak, to give
human security and to seek a wider distribution of our
national income. We are confident that, with the full
cooperation of the business world, our present difficulties
will be overcome; and that the aims that I have set forth
above, which are properly those of private business as well
as those of the National Government, will be achieved.
Regraded Unclassified
164
UPM DRAFT 101037 FOR SECRETARY'S SPEECH 111037
Mr. Chairman, Senator Byrd, Members and guests of
the Academy:
You have asked me to speak to you tonight about
the "Expenditures of the Federal Government." I note
that your discussions this morning included an address
on the budget of the United States during the past ten
years. This afternoon you considered whether our present
income will meet our present expenditures. I suspect
your conclusion was that if current income is less than
current outgo, we must either spend less or tax more.
Perhaps you think we should do both.
In any consideration of the expenditures of the
Federal Government, the most important concern to me as
Regraded Unclassified
165
- 2 -
Secretary of the Treasury has to do with the amount to
be spent over the coming period of at least two or three
years. Estimates are now being prepared for the expendi-
tures of the fiscal year 1939, ending June 30th of that
year. What is the trend going to be, both as respects
the total of our expenditures and its relationship to
tax receipts? That is of great interest to me, and I
am sure it is of great interest to you.
During the last four fiscal years, the Federal
Government has spent over thirty-one billion dollars. Its
total revenue during the same four years, derived for the
most part from taxes, has been sixteen billion dollars.
The budget deficit for four years of operation reached
a total of fifteen billion dollars on June 1st of this
year -- four months ago. The current fiscal year will
Regraded Unclassified
166
- 3 -
add another half billion to that total. It will increase
the total still more if the Congress adds other appro-
priations and other expenses to those already authorized.
In every successive year from 1927 to 1937, with
one single exception, the expenditures of the Federal
Government have increased over those of the preceding
year. (For the purpose of this statement the bonus pre-
payments of last year and this are excluded from the
figures, as is debt retirement.)
Let us hastily run through the totals:
1927 -
2 billion 8
1928 -
2 billion 9
1929 -
3 billion 1
1930 -
3 billion 3
1931 -
3 billion 6
1932 -
4 billion 7
1933 -
4 billion 6
1934 -
6 billion 7
Regraded Unclassified
167
- 4 -
1935 -
6 billion 8
1936 -
6 billion 8
1937 -
7 billion 4
An editorial writer in the Evening Sun at Baltimore has
formulated what he calls the Smoot Law of Government
Costs, which is to the effect that regardless of the
Party which may happen to be in power, the cost of govern-
ment always rises. The history of the last decade, at
least, would seem to bear this out.
It is frequently said that the way to reduce ex-
penditures is to reduce them. You know as well as I do
that it is easier said than done. I suspect your discussion
this afternoon of Vested Interests in Government Spending
brought out important angles of that situation. Each sec-
tion and each group -- I almost said each individual --
wants total costs reduced, but not the costs of things of
Regraded Unclassified
168
- 5 -
local interest. A business leader of the Southwest
recently spoke in bitter condemnation of the Government
public buildings program only to conclude with a guilty
grin and the confession that he had joined the week
before in a local Chamber of Commerce petition to Wash-
ington for the erection of a Federal building in his own
city. Where is there a city that will fail to object if
reducing Government costs means closing a CCC camp in the
neighborhood?
What are we spending in the current fiscal year?
What we call regular operating expenditures will total
three and a quarter billion dollars. Nearly a billion
dollars of this is being paid out in interest on the
public debt. There can be no reduction there, except as
we reduce the debt, and even then there is always the
Regraded Unclassified
169
- 6 -
possibility that rising rates will keep the total interest
charge at about the same figure.
Nearly a billion dollars of the 1938 budget goes
for national defense. In the face of world conditions of
today, can we make substantial cuts there? More than half
a billion is being spent. for veterans' pensions and bene-
fits -- and this figure does not include bonus payments.
There can be no cut there.
The only other item included among regular operating
expenditures 1s the administrative costs of the Congress,
the Federal Courts, and the Executive branch. This totals
eight hundred million dollars. Some savings is being made
here, and perhaps more can be saved. But that total is
not excessive in comparison with past years, certainly not
so when we consider the greatly expanded Governmental or-
ganization and overhead costs.
Regraded Unclassified
170
- 7 -
Public works account for nine hundred million of
the current budget. And there has already been appro-
priated in addition to this amount another seven hundred
million for public buildings, public highways, river and
harbor improvements, flood control, PWA grants, soil
erosion, emergency housing, and similar purposes. That
means that without another dollar being appropriated by
the Congress for these purposes, there will be available
seven hundred million to be spent in 1939 (and later years).
During the current year there is being spent more
than a billion and six hundred million dollars for the
relief of unemployment and for the operation of the CCC
camps. How much can that be reduced in subsequent years?
Regraded Unclassified
171
- 8 -
The Agricultural Adjustment (Soil Conservation (?))
program, the Social Security program and some minor mis-
cellaneous items add one billion four hundred million to
the expenditures of the current year. While these are
partly offset by special taxes, they include certain items
of expenditures and grants which are not so offset. They
add & permanent burden to the budget of two hundred million
next year, and in the course of the next few years five
hundred million annually which is not offset by special
taxes.
What may drought, flood, business recession, or war
add to the expenditures of this and coming years? It is
obvious that no matter how great our desire to reduce the
cost of Government, there will be the greatest difficulty
Regraded Unclassified
172
- 9 -
in making substantial reductions in regular or emergency
costs. Here is a wheel to which we must all put our
shoulders.
For I am confident that you are in agreement with
me as to the necessity for promptly bringing our expendi-
tures within our income, -- and well within it, -- 80 that
not only will the budget be balanced, but our total debt
reduced.
(Leaving out of consideration gold acquisitions,
the debt in the hands of the public will be reduced in the
current fiscal year by more than a billion dollars.)
As Secretary of the Treasury I must not speak to
you with too great assurance about future expenditures of
the Government. The Treasury does not determine how much
173
- 10 -
money is to be spent or how it shall be divded among the
various agencies and functions. The President and the
Congress have that responsibility. In the final analysis,
it is determined by the people. As you know, there are
1
some who think Government expenditures have been too small
rather than too large.
The Treasury does not spend the money, except the
sums appropriated for its own administrative expenses.
Its function is to raise the money which other agencies
spend. Naturally enough, however, the fiscal department
of the Gove mment has some participation in and some re-
sponsibility for the determination of total costs. I do
not seek to shirk that responsibility. We must collect
the taxes and adjust the tax burden fairly. We must know
Regraded Unclassified
174
- 11 -
the needs and the temper of the market through which we
borrow. Together with the Federal Reserve System we must
guard and protect the value of the American dollar.
For after all, in my view, dollar control is fully
as important as crop control, or wages control, or hour
control. The effects of the others are determined by the
value of the dollar. Its value determines the farmers
income or the industrial workers income just as surely as
does control of production or control of working conditions.
Of what account is a high price for farm products if the
dollars paid are of less value. What a hollow victory is
a high wage if paid in currency of low buying power. May
it not very well be that more important than any of these
things is a sound financial program for the coming years
which will prevent any possibility of the dollar becoming
unstable?
Regraded Unclassified
175
- 12 -
I do not insist that the budget be balanced every
year. I do not agree with those who deplore the expendi-
tures that this Government has made. They had to be made.
Fortunate is he who accumulates a surplus in good times
to carry him over bad times. But the unbalanced budget
and increase in debt 1s familiar to us in our individual
lives as well as in business life.
The young lawyer or doctor or dentist may go into
debt for his education and to get his practice started.
The farmer may borrow to buy his land, his machinery, and
his seed. The new business enterprise goes into debt that
it may expand and wisely grow. The head of a family will
even incur a debt of staggering proportions if it is nec-
essary to save the lives of members of his family.
Regraded Unclassified
176
- 13 -
I see no reason for defending or apologizing for
the expenditures of past years. Intelligent men recog-
nize that they were vital. I see no reason for harboring
regrets about the purposes of the expenditures or the way
in which the money was spent. For the most part, we have
spent wisely and well.
Some of the expenditures of recent years are re-
coverable. They went for loans to various agencies and
groups, and for capital stock in credit agencies and in-
stitutions. Our expenditure picture is going to be
brightened by the winding up of many of these agencies.
There is considerable molasses in some of those barrels.
We shall scrape them well, and then break up the barrels
so there will not be any temptation to fill them up again.
Regraded Unclassified
177
- 14 -
The expenditure of two and a quarter billion for the
bonus would have been made in 1945 if it had not been
made now. (The amount of an advance payment is frequently
carried by a business concern as an asset.)
Our net deficit might have been less if we had
done two things we did not do. To me these negative
actions are as significant as any of our positive accom-
plishments. We have not used the major portion of the gold
increment. It is still available for debt retirement.
Even more important, in my opinion, we have not resorted
to the use of greenbacks for the payment of current debt.
Not a dollar of the authorized three million of so-called
Thomas currency has been issued.
There are other reassuring items to brighten some-
what the black picture I have painted. Total expenditures
Regraded
178
- 15 -
are turning downward. With the exception of an almost
negligible decrease in 1933 costs under those of 1932,
the current fiscal year is the first since 1927 when
Government expenditures were less than the preceding
year. (If we include bonus payment, 1937 showed a de-
cline and 1938 a still further decline.) The coming
fiscal year should show a further reduction.
Moreover, our income is rising. It has increased
every year since 1932. Let us run over the figures here
also:
1932
2 billion 006
1933
2 billion 080
1934
3 billion 116
1935
3 billion 8
1936
4 billion 1
1937
5 billion 2
1938
6 billion 7
Regraded Unclassified
179
- 16 -
With increased business activity and a higher
national income, naturally tax receipts grow. Improve-
ments in the revenue laws has also contributed to this
growth in receipts.
We have reached the place, it seems evident to
me, where our costs must be met out of current taxes.
That means that instead of fixing our expenditures and
borrowing the excess over revenue, we determine what is
8 fair and just tax burden and then squeeze expenditures
within that figure.
The young professional student who borrowed to
pay for his education meets failure unless his practice
pays well enough for him to wipe out his debt. The farmer
is in distress if his crop does not bring him enough to
Regraded Unclassified
180
- 17 -
pay for his seed, his production costs, and reduce the
mortgage. The new business enterprise goes on the rocks
if its sales do not permit the gradual retirement of its
-- bonds or its floating debt. The householder becomes dis-
couraged if his debt for the health of his family becomes
a permanent saddle.
I do not mean to suggest that there is an exact
parallel between these individuals and concerns and the
Federal Government. Perhaps we can carry a permanent
debt of considerable size. But the Government that con-
tinues too long with income above outgo is as surely
headed for disaster as is the individual or corporation.
The President of the United States recognizes that. He
Regraded Unclassified
181
- 18 -
has stated it time and again. In 1932 he declared that
liberal governments too often were wrecked on the rocks
of financial excess. (Check statement and date.) In his
1937 budget message the President stated his belief that
"it is the deficit of today that is making possible the
surplus of tomorrow." In his last budget message, that
for fiscal 1938, the President insisted that new expendi-
tures authorized by Congress be matched by new revenue.
He is taking effective action to bring costs within income.
A percentage of appropriations is being impounded. Emer-
gency agencies are being liquidated, stopping administra-
tive expenses and restoring assets to the Treasury. The
promise is being performed.
Regraded Inclassified
182
- 19 -
This does not mean at all that human needs are
to be ignored or national development neglected. Never
in the history of our country has there been as adequate
and far-seeing a program for the development of natural
resources as there is today. Never in our history has
there been the provision that is now a permanent part
of our plans for the future of the unemployed, the under-
privileged and the sick. As we advance, these things will
be improved.
There is much to be done that we cannot do, certainly
not all at once. To continue longer with an unbalanced
Treasury budget would endanger the whole program -- what
has been done and what remains to be done. The way to
balanced economy and 8. more abundant life is not to be
found through an unbalanced Federal budget.
oo0oo
Regraded Unclassified
183
Various tabulated material used in connection
with writing the Secretary's speech for the Academy
of Political Science.
Regraded
Actual expenditures of the Government for fiscal years 1926-1937
(Classifications include expenditures from both general and emergency funds)
184
(In willions of dollars)
2
Total
I
Total
I
Total
:
Aggregate
I
1926-1929
I
1930-1933
I
1934-1937
2
1926-1937
Regular operating expenditures:
Legislative, judicial and civil establishments
2,816.0
3,256.7
2,749.1
8,821.5
National defense
2,466.8
2,775.9
3,096.9
8,339.6
Veterans' pensions and benefits
(excluding bonus prepayment)
2,829.3
3,541.1
2,415.2
5,785.6
Interest on the public debt
3,029.0
2,559.6
3,193.3
8,781.9
Total
11,141.1
12,133.3
11,454.5
34,728.9
Public works:
Public buildings
47.1
303.1
281.0
631.2
Public highways
377.9
651.8
1,179.7
2,209.4
Rivers and harbors
292.0
463.0
512.5
1,567.5
PEA (grants and admin. expenses)
-
-
574.6
574.6
Other
31.7
76.4
362.0
470.1
Total
748.7
1,494.3
3,209.8
5,452.8
Unesployment relieft
Direct relief
-
350.7
3,355.4
3,706.1
-
-
Work relief
3,977.5
3,977.5
Civilian Conservation Corps
-
-
1,639.5
1,639.5
Total
-
350.7
8,972,4
9,323.1
-
Agricultural adjustment program
-
2,098.7
2,098.7
Social Security
-
-
476.2
476.2
-
-
Miscellaneous
36.6
36.6
Total nonrecoverable expenditures (excluding
bonns and debt retirement)
11,889.8
13,978.3
26,248.2
52,116.3
Loans (net)
5.6
1,666.2
456.9
2,128.7
Subscriptions to capital stock
6.0
737.7
1,089.7
1,833.4
Total expenditures (excluding borns and
debt retirement)
11,901.4
16,382.2
27,794.8
56,078.4
Bomns prepayment
-
-
2,230.2
2,230.2
Debt retirement
2,096.9
1,868,2
1,440.7
5,405.8
Total expenditures
13,998.3
18,250.4
31,465.7
Regraded Unclassified
185
Actual expenditures of the Government for fiscal years 1926-1929
(Classifications include expenditures from both general and emergency funds)
(In millions of dollars)
:
1926
--
1927
:
1928
:
1929
:
Total
Regular operating expenditures:
Ingislative, judicial and civil establishments
666.9
589.4
708.6
851.1
2,816.0
National defense
579.7
584.4
624.6
678.1
2,466.8
Veterans' pensions and benefits
(excluding borrus prepayment)
650.5
721.8
723.9
733.1
2,829.3
Interest on the public debt
831.9
787.0
731.8
678.3
3,029.0
Total
2,729.0
2,682.6
2,788.9
2,940.5
11,141.1
Public Works:
Public buildings
2.1
7.8
6.7
30.5
47.1
Public highways
98.8
92.5
91.1
95.5
377.9
Rivers and harbors
70.3
65.4
72.9
83.4
292.0
-
-
PEA (grants and admin. expenses)
-
-
-
Other
3.4
5.2
9.5
10.5
31.7
Total
174.6
173.9
180.2
220.0
748.7
Unemployment relief:
-
-
Mrect relief
-
-
-
-
-
-
-
Work relief
-
Civilian Conservation Corps
-
-
-
-
-
-
-
-
-
Total
-
-
-
-
-
-
Agricultural adjustment program
Social Security
-
-
-
-
-
Miscellaneous
-
-
-
-
-
Total nonrecoverable expenditures (excluding
bonus and debt retirement)
2,903.6
2,856.5
2,969.1
3,160.6
11,889.8
Loans (net)
-
-
-
5.6
5.6
Subscriptions to capital stock
-
1.0
-
5.0
6.0
Total excenditures (excluding bonus
and debt retirement)
2,903.6
2,857.5
2,969.1
3,171.2
11,901.4
Bonue Prepayment
-
-
-
I
#
Debt retirement
487.4
519.6
540.3
549.6
2,06.4
Total expenditures
3,391.0
3,377.1
3,509.4
3,720.8
13,996.3
Regraded Unclassified
Actual expenditures of the Government for fiscal years 1910-1933
(Classifications include expenditures from both general and emergency funds)
163
(In millions of dollars)
:
:
:
: 1930
:
1931
:
1932
:
1933
:
Total
Regular operating empenditures:
Legialntive, judicial end civil establishments
789.5
790.9
978.8
697.5
3,256.7
National defense
701.3
699.2
707.6
667.8
2,775.9
Veterans' pensions and benefits
(excluding bonus prepayments)
753.5
939.6
984.8
863.2
3,541.1
Interest on the public debt
659.3
611.6
599.3
689.4
2,559.6
Total
2,903.6
3,041.3
3,270.5
2,917.9
12,133.3
Public works:
Public buildings
43.0
67.7
86.5
105.9
303.1
Public highways
89.3
174.4
209.9
178.2
651.8
Rivers and harbors
106.5
121.3
116.8
118.4
463.0
PMA (grants and admin. expenses)
-
-
-
-
-
Other
11.0
13.9
26.3
25.2
76.4
Total
249.8
377.3
439.5
427.7
1,494.3
Unemployment relief:
Direct relief
-
-
-
350.7
350.7
Work relief
-
-
-
-
-
Civilian Conservation Corps
-
-
-
-
-
Total
-
-
-
350.7
350.7
Agricultural adjustment program
-
-
-
-
-
Social Security
-
-
i
-
1
-
Miscellaneous
-
-
-
-
-
Total nonrecoverable expenditures (excluding
bonus and debt retirement)
3,153.4
3,418.6
3,710.0
3,696.3
13,978.3
Loans (net)
154.8
233.0
404.0
874.4
1,666.2
Subscriptions to capital stock
-
-
627.0
110.7
737.7
Total excenditures (excluding bonus
and debt retirement)
3,308.2
3,651.6
4,741.0
4,681.4
16,332.2
Bonus Prepayment
-
I
-
I
I
Debt retirement
!
553.9
440.1
412.6
461.6
1,868.2
Total expenditures
3,862.1
4,091.7
5,153.6
5,143.0 Regraded Unclassified
187
Actual expenditures of the Government for fiscal years 1934-1937
(Classifications include expenditures from both general and emergency funds)
(In millions of dollars)
:
:
:
:
:
1934
1935
1936
1937
Total
:
:
:
:
:
Regular operating expenditures:
Legislative, judicial and civil establishments
572.5
597.7
781.1
797.8
2,749.1
National defense
540.3
709.9
911.6
935.1
3,096.9
Veterans' pensions and benefits
(excluding bonus prepayment)
556.9
607.1
677.9
573-3
2,415.2
Interest on the public debt
756.6
820.9
749.4
866.4
3,193.3
Total
2,426.3
2,735.6
3,120.0
3,172.6
11,454,5
Public works:
Public buildings
78.7
58.1
67.9
76.3
281.0
Public highways
267.9
317.3
243.9
350.6
1,179.7
Rivers and harbors
150.8
203.0
223.7
235.0
812.5
per (grants and admin. expenses)
18.8
48.9
233.9
273.0
574.6
Other
35.7
77.0
99.3
150.0
362,0
Total
551.9
704.3
868.7
1,084.9
3,209.8
Unemployment relief:
Direct relief
715.8
1,914.1
591.7
133.8
3,355.4
Work relief
805.1
11.3
1,264.4
1,896.7
3.977.5
Civilian Conservation Corps
331,9
435.5
486.3
385.8
1,639.5
Total
1,852.8
2,360.9
2,342.4
2,416.3
8,972.4
Agricultural adjustment program
290.3
743.0
542.6
522.8
2,098.7
Social Security
-
-
28.4
447.8
476.2
Miscellaneous
8.7
21,1
6.8
-
36.6
Total nonrecoverable expenditures (excluding
bome and debt retirement)
5,130.0
6,564.9
6,908.9
7.644.4
26,248.2
Loans (net)
788.6
80.5
-175.2
-237.0
456.9
Subscriptions to capital stock
826.5
150.8
69.3
37.1
1,069.7
Total expenditures (excluding borras and
debt retirement)
6,745.1
6,802.2
6,803.0
7,444.5
27,794.8
Bonus prepayment
-
-
1,673.5
556.7
2,230.2
Debt retirement
359.9
573.6
403.2
104,0
1,440.7
Total expenditures
7,105.0
7.375.6
8,879.7
5,105.2
Redraded Unclassified
188
Proprietary Interest of the United States in Governmental Corporations and Credit Agencies,
as of June 30, 1929 to 1937
(In millions of dollars)
:
1929
:
1030
:
1931
:
1932
:
1933
I
1934
: 1935
:
1936
I
1937
Financed wholly from Government funds:
Reconstruction Finance Corp.
-
-
-
780
1,498
2,452
2,035
1,804
1,491
Commodity Credit Corp.
-
-
-
-
-
206
154
244
123
Export-import Banks
-
-
If
-
-
14
14
18
17
Public Works Admin.
-
-
-
-
-
145
312
152
146
Regional Agric. Credit Corp.
-
-
-
-
150
51
77
35
27
Production Credit Corp.
-
-
-
-
-
106
121
121
121
Panana Railroad Co.
40
42
42
45
43
43
43
43
44
Shipping Board Merch. Fleet Corp.
210
207
217
233
224
143
182
151
87
War Emergency Agencies
14
11
10
10
10
10
9
9
8
Parn Loan Board - Corp. Loans
7
160
392
626
3/
-
-
-
-
Para Credit Administration
-
-
-
I
556
74
193
175
191
Inland Waterways Corp.
20
21
24
24
25
2
24
24
25
25
Railroad Obligations
62
55
40
39
38
38
31
30
30
Tennessee Valley Authority
-
-
-
-
1
2
64
96
179
Subsistence Homestends (R.A.)
-
-
-
-
-
3
24
80
128
Federal Housing Administration
1
-
-
-
-
-
20
30
30
R. F. C. Mortgage Corp.
-
-
-
-
-
-
4
18
48
Rural Electrification Administration
-
1
1
-
-
-
-
12
Other
-
-
-
-
-
1
5
6
14
Total Group 1
353
496
725
1,759
2,544
3,319
3,317
3,038
2,721
Financed partly from Government and
partly from private funds:
Federal Land Banks
4
4
4
125
125
161
251
256
292
Federal Intermediate Credit Banks
32
35
34
36
50
85
84
103
104
Federal Farm Mortgage Corp.
-
-
-
-
-
197
206
201
177
Banks for Oboperatives
#
-
-
1
-
111
129
156
154
Home Loan Banks
-
-
-
I
43
81
82
100
121
Home Owners Loan Corp.
-
-
-
-
1
144
70
13
68
Federal Savings & Loan Insurance Corp.
-
-
-
-
-
-
102
104
106
Federal Savings & Loan Associations
-
-
-
I
-
1
32
102
48
Federal Deposit Insurance Corp.
-
-
-
-
-
150
150
150
150
War Finance Corp.
1
1
1
1
1
4/
4/
Total Group 2
33
34
35
162
230
930
1,106
1,185
1,222
Grand Total
386
530
750
1,921
2,774
4,249
4,423
4,223
3,943
1
Source: Armual Report of the Secretary of the Treasury, 19361 Daily Treasury Statement, July 31, 1937.
Estimated. 3/ Transferred F.C.A. 4/ Less than one million.
seveires
Daily Treasury -
(In willims of dellare)
July and
July -
1937 -- compared with 1934
August
August
1937
1956
Increase
Decrease
GENERAL AND SPECIAL ACCOUNTS
Receipts:
Internal revenue:
Income tax
4 92.5
71.2
6 81.3
* -
Missellanemas internal
500.1
454.7
07.4
-
Unjust enrichment sex
.6
I
.6
-
Taxes under Social Security Act
118.5
I
113.5
-
Taxes upon carriers and their employees
.1
-
-1
-
Qualque
19.4
66.3
19.1
-
Niscellameous receipts:
Proceets of securities:
Printipal-fereign obligations
I
-
-
-
obligations
-
I
I
-
All other
18.2
12.8
6.0
-
Passan Count tolls, atc.
4.2
:
I
-
Asigniarage
7.8
9.1
-
L.#
Other missellansous
SL.7
9.1
10.0
I
Total receipts
062.6
636.9
MED.T
1
Agentitures:
I. General:
Departmental
100.5
14.2
8.4
-
Public buildings
7.6
8.1
4.0
-
Penise highways
38.5
14.7
17.0
-
River and harber work m4 flood control
28.9
17.7
11.8
-
Reclamation projects
6,1
-
4.1
-
Panama Camal
2.5
2.0
a
-
Festal deficiency
9.4
1.5
4.9
-
Railroad Retinees Ast
.9
a
,
I
Social Security Act
46.6
25.5
81.1
-
Distriet of Columbia (U.S. share)
5.0
5.0
-
-
National defense:
Any
67.8
64.8
1,3
I
Havy
90,3
97.6
18.9
-
Telenues' Administration
07.1
96.4
,
-
Agrioultural Adjustment Program
36.7
57.4
I
30,9
Civilian Conservation Corps
63.2
25,8
59.4
-
Farm Credit
1.1
J 3.0
1
-
Telephone Valley Authority
7.0
5.8
1.1
-
Interest - the public debt
22,0
55.6
-
a.e
Refunds:
Customs
2.4
1.8
-
-4
Internal
0.0
4.8
-
L#
Processing tax on farm products
,9
A
.5
-
Subtotal
547.0
883.1
113.0
-
II, Recevery and relief:
Agricultural AS&I
Federal landbanks
9.9
11.0
-
LA
Relief
.8
49.2
-
44,4
Public works {imiluding work relief):
Realamation projects
5.4
3,5
1.9
-
Public highways
19.5
61.7
I
42.1
River and harber work and flood control
6.8
88.4
I
81.8
Rural Elastrification Administration
4.2
.7
5.5
-
Notice Progress Administration
238,0
314.7
-
19,9
All other
44.1
67.7
-
a.e
A14 to home ownered
Las loas system
1.8
a.5
-
1.0
Assergency housing
11.4
4.9
4.5
-
Federal Breating Administration
8.6
2.3
,3
-
Reserviment Administration
52.2
23.4
8.0
-
373.4
270.9
I
199.0
m. Revolving funds (not):
13C
Agricultural aid:
47
Commity Credit Corporation
1
in
a 66.4
60.5
-
Farm Credit Administration
de 5.9
2 5.7
I
a
Page is write:
incure sal grasts to States, municipalities, etc.
37.2
60.4
-
a.s
loss to reilmeds
à .1
:-
I
-
Miscallameous:
Report-laport Bank of Washington
a .1
: .9
+
-
Finance Corporation--direst loans
and expenditions
, n.,
a 150.0
198.0
I
Oubtotal
8.1
a 226.9
833.0
I
Total eash ourgeing
1008.0
077.1
151.4
-
IT. Transfers se trut swemie, etc.:
014-age passerve -
65.0
-
85.0
-
Ballrood retirement account
30.0
I
m.o
-
Adjusted service surtificate fund
I
35.8
I
N.O
General employees' nitrest the
(Datted share)
15.8
45.7
2
-
Subtotal
184.2
06.0
99.7
-
V. Debt (staking has, etc.)
-
83.1
I
a:
Total
1814.9
i
THE
-
of receipts
-
-
-
-
Byness of qualities
THE
265.7
4.4
I
1 bas credits, debet.
- -
Register 4, 1997
Regraded
ssified
190
983-A
September 20, 1937
STATEMENT OF THE PRESIDENT
ON SEPTEMBER 21, 1937.
The President announced today that he had just approved
the allotment of & few border-line applications for PWA projects,
which increases the number allotted under the new program to
1,253 projects, amounting to $113,034.735 in grants and $58,005.700
in loans.
This concludes the allotment of projects under the Public
Works Administration Extension Act of 1937.
The President said that Administrator Ickes has withheld
recommonding for approval a large number of projects which have been
passed by the examining divisions of the Public Works Administra-
tion because it was found that the applicant could finance the proj-
ect without Federal aid. Considering the need to curtail the Federal
Budget and the improved financial status of so many communities
throughout the United States, the President said he believes this to
be sound public policy. The limitations on the amount that may be
allotted in the several categories under the new law has resulted in
disappointment to many applicants because the total of applications
filed greatly exceeded the limitations in some categories, which
made it necessary for the Public Works Administration to select a
limited number of applications for allotment. This situation was
inevituble because the grant allotments requested on approved appli-
cations in hand amounted to $609,096,573 covering 4,315 projects and
the appropriation was sufficient for only a fraction of them. "We
have tried to apply equitable principles", the President stated.
He pointed out that the Public Works Administration was
established to stimulate construction and employment during the de-
pression and that it fulfilled its mission promptly and effectively,
Under the various programs since 1933, allotments have been made for
10,605 useful non-Federal Public Works Administration projects cost-
ing $2,759,172,739. Of these projects, 7,845 costing $1,208,539,612
have been completed, creating to date 661,088,747 man-hours of direct
employment on the project sites. The Bureau of Labor Statistics has
found that for each hour of employment at the site, two and one-half
hours of employment are created in industry. Because allotments for
so many projects have recently been announced, it has not been pos-
sible to compile an estimate of the employment that will be created
by the remainder. of the program but there is every reason to expect
that it will be proportionate to that of the past.
There has been a decreasing need for this stimulation with
the passing of the economic extremity and the President feels that
the Administration has fulfilled Its obligation under the present law.
191
20: 200 Secretary
From: Secton
Subject: Social Security ?unds and the Budget
gyer 81900 the President's budget came out last January various business and
: services have been calling attention to the great debt retirement
porsibilities in the Social Security trust funds and the added fact that from
the notual cash income and cash outgo basis we would probably have a surplus
in this flacal year even though the budget would not be balanced on any
booksceeping basis. This expectation is supported by the budget sumation,
which scows:
"at estimated deficit
695 millions
Old age reserve account
special investment
425
Unemployment trust fund
receipts (astimated in
annual report)
576
if
Total trust funds
1001
N
Cash surplus
306 millions
What this means 1s that of the total of expenditures (not including debt
retirement) of 7,346 millions, going to maice up the deficit of 695 millions,
toore is an amount of 425 millions for the old age reserve account which is not
or. actual cash exponditure but a book-keeping transaction consisting of the
Lieus of special 3 $ securities in this amount, leaving the cash in the Treasury.
The unemuloyment trust fund receipts do not appear in the budget receipts or
impenditures, but they do appear in the trust fund and public debt divisions of
the Daily Treasury Statement. The Treasury receives the cash from the states
and wate it in the General Fund after issung special 20% securities for it. It
has the BATE bookkeeping effect as the sale of bonds in that amount.
So the fact is that althous we have a net deficit (or expect to have) this
your of 695 millions, we are in fact receiving from the public 306 millions more
than we expect to pay out. Ignoring gold sterilization, this amount would be
available in cash to retire the same amount of public debt held by the banks and
private investors. If we had been able to achieve the "layman's balance" that the
President talked about earlier in the year we should have had more than a billion
dollars ($1,001 millions) available for this purpose--again ignoring gold steril-
instion.
If you wished to limit debt retirement next year to these Social Security
and of more than a billion dollars it would mean simply arriving at a bookkeeping
balance of revenue and expenditure with no deficit and no surplus. In other words,
it would mean increase in revenue and/or decrease in expenditures amounting on
20th sides to 595 millions. I have not seen any late estimates, but it is probable
(2)
192
currented will increase this such (if rates stay the DATE and tre don't have
a roal ogression) so that wethout any dicrease in expenditures we could still do
the trick.
In an undertain state of the national economy there is something to be said
for mach - decision. The fact is that we are withdrawing in the form of taxes on
carrolin (mmployers and employees) in this fiscal year. according to estimates,
$1,182,035,000 and we are paying out in expenses and grants to states for social
security only $182,759,000, making almost an even billion that we are taking out of
possible constrytion expenditure 00 this account. This must certainly be B. far heavier
yes to recovery and D. far heavier deflationary action than the undistributed
profits tax 05 the increases in income tax rates.
THE justification for doing this is that in the Social Security Act we have
obligations which are accruing right now and that we must nace provision
No to but them in the future. We do this by reducing the debt in the hands of the
erblic to the amount of the contributions to the reserve funds, 80 that as the new
special SM increases the old general debt decreases, so that we won't have a
Bouble losá of liability in the future. The effect is just the same as if a private
corporation were the custodian of these fundo and invested them in government
securities. Too government as custodian can find no better or safer investment for
140 Date than to issue its own obligations and use the cash to reduce its own debt,
you itself in position to meet the obligations when they fall due.
I: 14 Seen subjested by a good many people that it would have a better effect
X or extional sconomy if the necessary revenue to reduce the public dobt quickly
and 1216 got the government in position to met the social security
In the future were rained by general lazation instead of by the payroll
class. 2000 people suggest higher income tax rates as the right answer.
The objection urged against this is that now we are taxing only the people who
are to be benefitied (this in fact in not quite true) and that if we taxed everybody
ac And ave to spread the benefits more widoly--teice in everybody who may need
minust, old age and unexployment help in the future.
I Intrik you suggested that it would be better bookkeeping If Social Security
new out of the general fund and we budgeted only the annual Social
SECURITY inficit. The difficulty with doing this is that, in order to make the law
the taxes were not levied for the special purpose of social security,
Ent 45 Onezal laxation which cust 00 into the general fund.
5 il ,
It LTV taxing 306 millions in cash more from the public than WE are paying out
1: 1345 fiscal year (1938). This 19 a big jung from Inst year, when we paid put at
10015 two billions more than we took in.
sugmeta a very careful examination of bow much we should increase this
M cast: 1-take next year. A "Isyman" kiknass balance" would mean that we would take
in Nous a billion more than we pay out-maybe as much as e billion And n. quarter,
NB
Unclassified
193
September 22, 1937.
MEMORANDUM FOR MR. BAILEY:
With respect to your inquiry as to the expenditures of the
Resettlement Administration, particularly the excess of expendi-
tures in August, 1937, over the corresponding month for 1936, you
are advised that the program of the Administration reached a peak
during the last four months of the fiscal year 1937 and started
to decline in the present fiscal year. There will be 8 gradual
decline in expenditures during the remaining months and it is
anticipated that the total for this year will be about $135,000,000
as compared to approximately $210,000,000 in the past fiscal year.
The following statement shows the monthly expenditures from the
high point in March, 1937 to and including August:
March
$29.9 M
April
29.6 M
May
22.8 M
June
21.2 M
July
19.2 M
August
13.0 M
The expenditures for the first 18 days of September are $6.2 M
or about 75% of the expenditures for the same period in the month
of August, indicating the continuation of the decline. At the
present time the Administration has an unexpended balance of $89.4 M
and additional allocations will be made to complete programs now
under way amounting to $ 50.0 M, which will leave an unexpended
Regraded Unclassified
194
- 2 -
balance at the end of the fiscal year of approximately $40.0 M.
With respect to the increase in expenditures of Public Works
Administration for loans and grants to States for the month of
August, 1937, over the month of August, 1936, you will realize
that these expenditures are on a net basis. The actual payments
for the month of August, 1936, were $33.9 M, offset by repayments
through liquidation of assets of $18.0 M, leaving & net expendi-
ture of $15.9 M. For the month of August, 1937, the actual ex-
penditures were $19.6 M, while repayments through liquidation of
assets amounted to only $1.6 M, leaving a net expenditure of $18.0 M.
It can be readily seen, therefore, that there has been a decline
of $14.3 M. in the expenditures of the Public Works Administration.
There has also been a decline of $16.4 M in repayments. These re-
payments are almost entirely through bond sales to the Reconstruc-
tion Finance Corporation. Two factors ordinarily govern the disposi-
tion of these bonds - first, the needs of the Public Works Administra-
tion for additional funds for the purpose of obligation, and, second,
the type of bonds which the Public Works Administration holds in its
portfolio. The Reconstruction Finance Corporation takes such bonds
as are considered readily marketable. On August 31, 1937, Public
Works Administration had on hand bonds to the value of $128.8 M,
while the Reconstruction Finance Corporation held $86.8 W worth of
securities.
AOL
195
BUREAU OF THE BUDGET
WASHINGTON
Rept 22, 1937
MEMORAN DUM FOR THE SECRETARY:
The following tabulation indicates the amount made
available by Congress for grants for Public Works Admini-
stration non-Federal projects from funds received from the
sale of securities and projects approved by the President
through September 20, 1937.
Public Works Administration
Amount
Grants authorized under ERA of 1936
$300,000,000
Additional grants authorized under PWA
Extension Act of 1937
59,000,000
Total made available for grants
$359,000,000
Projects approved by the President
Under ERA of 1936 to 6/30/37
$163,604,913
Under PWA Extension Act to
9/20/37
113,168,756
276,773,669
Balance
$ 82,226,331
Less Administrative Expenses 1938
15,000,000
Available for additional projects and
administration after 1938
$ 67,226,331
Acting Administrative Frienday Assistant.
Regraded
196
September 24, 1937.
MEMORANIUM FOR MR. BAILEY:
The balance of funds standing to the credit of the Public
Works Administration is entirely obligated. To meet obliga-
tions under the program which the President has approved, it
will be necessary to supplement the existing balance of P.W.A.
funds by the sale of $61,000,000 of the total amount of
$129,000,000 of bonds held by P.W.A.
It will also be necessary to sell bonds in the amount of
about $8,000,000 to provide funds for administrative expenses
for the fiscal year 1939.
Just how much of the remaining $60,000,000 in bonds can
be converted into cash during 1938 could not be estimated with
out an examination of the portfolio of the Public Works Admin-
istration. Some of these securities are readily marketable;
others by reason of the small size of the issue are only salable
locally in the community where the project is under way: still
others are payable from revenue produced by the project for the
construction of which they are issued. This latter group could
not be considered readily marketable until the project has been
completed and begins to bring in revenue, and some of these
projects will not be completed during the current fiscal year.
If the $60,000,000 in bonds is sold to the Reconstruction
Finance Corporation, the cash would be deposited to the credit
of the Public Works Administration. However, unless the Re-
construction Finance Corporation is able to dispose of these
bonds the total of Government expenditures would not be affected,
since Reconstruction Finance Corporation expenditures would in-
crease in the same amount as the Public Works Administration NI-
penditures were reduced by application of the proceeds of the
sale to the Reconstruction Finance Corporation.
The proceeds of all bonds held to maturity by the Public
Works Administration must be applied to the reduction of the
public debt, but this amount will be small in 1938.
#13
Regraded Unclassified
TIME:
PRESIDENT SCOUTS
-
'POLITICS' ON TOUR
He Expire Schedule Risters
-
Mim Time States of
dins
-
Cert Plan Consuments
TELLS WING-UP OF FW4
-
V
Class
No Prom Black - Kian,
" is Misled, - He Pressure
- MAY West Taley
ROUTES Mr. - WHICH " PRESIDENT will. POLLOW TO AND FROM THE PACIFIC MM
in
Be
$
!
-
-
If
154
in
1
i
X
the
I
-
TM
PRODUCTS
-
r
-
-
-
.
I
NEW YoRK TIMES
4
-
-
-
-
-
will
M
-
I
5
-
SEPT 22 1937
-
7
a
-
F
-
-
-
I
TO
an
the
-
-
7
r
à
w/
of
to
à
-
--
.
-
-
-
-
All
-
à
-
-
-
I
-
-
-
le
-
1:
-
-
1
-
==
Γ.
A
of
-
.
and
I
Regraded Unclassified
-
-
198
September 24, 1937.
MR. KIELEY:
Here are two memoranda requested by the Secre-
tary, in further explanation of my memorandum to him
of September 22.
Fisailey
199
September 24, 1937.
MEMORANDUM FOR THE SECRETARY:
In connection with the estimated unexpended balance of
$40,000,000 under the allocations to the Para Security (Re-
settlement) Administration, the estimate is based on two
factors - first, the current rate of expenditure, and, second,
the carry-over of unexpended balances at the close of the fis-
cal year 1936.
On June 30, 1937. the Resettlement Administration had out-
standing unliquidated obligations in the amount of $34,000,000.
It is estimated that somewhere in the neighborhood of $30,000,000
of obligations will be unliquidated on June 30, 1938, and that
$10,000,000 will remain unobligated at that time. However,
most of this latter amount will be needed for obligation to
complete programs which will be under way during the present
fiscal year.
The original amount which it was estimated that Resettlement
would require from the 1937 relief appropriation was reduced by
about $13,000,000 which was placed in the general reserve under
the relief appropriation. It was assumed that this would be
the maximum saving which could be made under the Resettlement
program. It will probably be as such as we can expect if we
maintain the reserve now established. The cash estimate for the
year, of course, was based on the assumption that this reserve
would be maintained.
Flailey
Regraded
Inclass
200
Regraded Unclassified
September 22, 1937.
MIMORANDUM FOR MR. BAILEY:
With respect to your inquiry as to the expenditures of the
Resettlement Administration, particularly the excess of expendi=
tures in August, 1937, over the corresponding month for 1936, you
are advised that the program of the Administration reached a peak
during the last four months of the fiscal year 1937 and started
to decline in the present fiscal year. There will be a gradual
decline in axpenditures during the remaining months and it is
anticipated that the total for this year will be about $135,000,000
as compared to approximately $210,000,000 in the past fiscal year.
The following statement shows the monthly expenditures from the
high point in March, 1937 to anjincluding August:
March
$29.9 I
April
29.6 If
May
22.8 If
June
21.2 M
July
19.2 M
August
13.0 M
The expenditures for the first 18 days of September are $6.2 M
or about 75% of the expenditures for the same period in the month
of August, indicating the continuation of the decline. At the
present time the Administration has an unexpended balance of $89.4 M
and additional allocations will be made to complete programs now
under way amounting to $50.0 M, which will leave an unexpended
201
- 2 -
balance at the end of the fiscal year of approximately $40.0 H.
With respect to the increase in expenditures of Public Works
Administration for loans and grants to States for the month of
August, 1937, over the month of August, 1936, you will realize
that these expenditures are on a net basis. The actual payments
for the month of August, 1936. were $33.9 M, offset by repayments
through liquidation of assets of $18.0 M, leaving a net expendi-
ture of $15.9 M. For the month of August, 1937, the actual are
penditures were $19.6 M. while repayments through liquidation of
assets amounted to only $1.6 M. leaving a net expenditure of $18.0 M.
It can be readily seen, therefore, that there has been a decline
of #14.3 M, in the expenditures of the Public Works Administration.
There has also been a decline of $16.4 M in repayments. These re"
payments are almost entirely through bond sales to the Reconstruc-
tion Finance Corporation. Two factors ordinarily govern the disposi-
tion of these bonds - first, the needs of the Public Works Administra-
tion for additional funds for the purpose of obligation, and,second,
the type of bonds which the Public Works Administration holds in its
portfolio. The Reconstruction Finance Corporation takes such bonds
as are considered readily marketable. On August 31, 1937, Public
Works Administration had on hand bonds to the value of $128.8 M.
while the Reconstruction Finance Cerporation held $86.8 M worth of
securities.
Regraded Unclassified
202
September 24, 1937.
MR. KIELEY:
This memorandum is responsive to a request from
the Secretary for suggestions as to existing Federal
Corporations the continuance of which might properly
be considered unnecessary.
Failey
Regraded Unclassified
203
September 24, 1937.
MYMORANIUM:
Re: Agencies which appear to have accomplished the
purpose for which they were established and
which might now be discontinued by Executive
Order.
Import-Import Bank of Washington
This Agency was created by Executive Order 6581, dated February
2, 1934. By Public No. 1, approved January 31, 1935, it was recognised
as an Agency of the United States. Under this Act provision was made
for continuing the Corporation until June 16, 1937 or such earlier date
as might be net by the President by Executive Order. Public No. 2,
approved January 26, 1937 amended the Act of January 31. 1935, by strik-
ing out the date June 16, 1937 and inserting in lieu thereof June 30,
1939. The authority of the President to discontinue this Agency by
Executive Order still remains.
The bank has never functioned as originally intended, that is, to
promote and facilitate trade with the Soviet. It has engaged in the
general development of foriegn trade. The volume of loans has never
been very extensive and the need of continuing the Agency any longer
is doubtful. The expenditures of this corporation in the present fie-
cal year up to September 21 amounted to only $41,676, while receipts
amounted to $173,394.
Unless some real substantial reason can be found for continuing
this Agency, and if there are no legal obstacles to its abolishment,
the Agency should be discontinued by Executive Order and its assets
transferred to the Reconstruction Finance Corporation.
Electric Home and Parn Authority
The present District of Columbia Corporation was authorised by
Executive Order 7139, dated August 12, 1935. By Public No. 484, any
proved March 31, 1936, the Corporation was continued as an Agency of
the United States until February 1, 1937. Under this Act the President
was authorised to discontinue the Corporation at an earlier date. By
the Act of January 26, 1937. Public No. 2, the extension date was changed
to June 30, 1939, but the authority of the President to discontinue the
Agency at an earlier date etill remains.
When the authority was first organised, its activities were con-
fined to the TVA area, later when its offices were moved to Washington
end since then constant efforts have been made to extend operations all
over the United States. Today the Corporation is carrying paper valued
at more than $4,500,000 and is operating in such cities as Fort Wayne,
Indians; Lansing, Michigant Los Angeles, California: Kaness City, Kansas:
Springfield, Illinois: Bartford, Connecticut, etc.
The need for the continuance of this Corporation as an Agency of
the United States may well be questioned. It can not very well point to
any accomplishment in bringing about the reduction of interest rates
Regraded Unclassified
204
- 2 -
because its own rates were reduced by the elimination of certain charges
in order that it might successfully compete with other financing com-
panies in Los Angeles.
As there is apparently no lack of facilities for financing the
purchase of electrical equipment at reasonable rates it would seem
that there is no sound reason why advantage should not be taken of
the authority conferred on the President by the Act of March 31, 1936,
and the Agency discontinued by Executive Order. If such action is
taken, its assets should be transferred to the Reconstruction Finance
Corporation.
FiBailey
Regraded
205
September 24, 1937.
Ste: Agencies which appear to have accomplished the
purpose for which they ware established and
which might me be discontinued by Inscutive
Order.
Export-Import Bank of Washington
This Agency - created w Executive Order 6582, dated February
2, 1934. By Public b. 1, approved January 31, 1935, it was recognized
as as Agency of the United States. Under this Act provision NO made
for continuing the Corporation until June 16, 1937 or such earlier date
as night be set by the President by Executive Order. Public No. 2,
approved January 26, 1937 amended the Act of January 31. 1935, by strik-
lag out the date June 16, 1937 and inserting in lieu thereof June 30,
1939. the authority of the President to discontime this Agency by
Precutive Order still remains.
The bank has never functioned as originally intended, that 18, to
promote and facilitate trade with the Soviet. It has engaged in the
general development of foriegn trade. the volume of loans has never
been very extensive and the need of continuing the Agency any longer
is doubtful. The expenditures of this corporation in the present fir
cal year up to September 21 amounted to only $41,676. while receipts
amounted to $173.394.
Unless some real substantial reason can be found for continuing
this Agency, and if there are no legal obstacles to its abolishment,
the Agency should be discontinued by Executive Order and its assets
transferred to the Reconstruction Finance Corporation.
Meotric lone and Parm Authority
the present District of Columbia Corporation use authorised by
Executive Order 7139, dated August 12, 1935. W Public No. 454, &
proved March 31. 1936, the Corporation was continued as all Agency of
the United States until February 1, 1937. Under this Act the President
vas authorized to discontinue the Corporation at a earlier date. By
the Act of January 26, 1937. Public No. 2, the extension date was changed
to June 30, 1939. but the mithority of the President to discontime the
Agency at an earlier date still remains.
the the authority was first organized, its activities wife ⑉
fined to the ave area, later when its offices were moved to Washington
and vince the mastant efforts have been made to extend operations all
over the United States. Today the Corporation is carrying paper valued
at more than $4,500,000 and is operating in such cities as Fort tayne,
Indiana: Lansing, Michigan; Los Angales. California: Inness City,
Springfield, Illinois; Hartford, Commesticut, etc.
the need for the continuance of this Corporation as as Agency of
the United States my well be questioned. It can not very will point to
my accomplishment in bringing about the reduction of interest gates
Unclassified
206
- 2 -
because its em rates were reduced by the elimination of certain charges
in order that 18 might successfully compete with other financing -
panies in Los Angeles.
As there is apparently as lack of facilities for financing the
purchase of electrical equipment at reasonable rates 10 would seen
that there is no sound reason why advantage should not be taken of
the authority conferred on the President by the Act of March 31, 1936,
and the Agency discontinued by Executive Order. If such action is
taken, its assets should be transferred to the Reconstruction Finance
Corporation.
de
Regraded Unclassified
name of main, APPROPRIATIONS AND
FINILL THAN 1936 - 1930
207
TIMES THAN 1938
FINAL THAN 1939
$6,650,410,000
$6,650,410,000
ENCHIPTS
increase (+) or -
uresse (-) belivers
(instating bal-
of -
1938 appropriations
- of -
Invisted
propristions -
est 1939 appropria-
Institution
production
Institute
the estimates
entt
Legislative, civil Department and Agencies and the Judiciary:
$24,325,691.78
$24,700,821.78
24
$23,500,000
+
$375,130
1. Legislative establishment
115
113,790,573
103,000,000
153,349,190
+ 39,648,317
2. Separtment of Agriculture
287,377,000
>>>
. 107,377,000
160,000,000
153,000,000
Public highwage
20,000,000
12,000,000
143,768,237
110
+
123,742,237
has transly
43,363,342
35,000,000
61,006,994
40
.
17,043,652
3- Department of Compres
160
203,090,982.66
.
115,000,000
56,444,694.81
146,546,267.85
-
in. Department of the Interior
1,000,000
-
-
1,000,000
U. 3. Housing authority
1,000,000
39
41,012,765
50,236,703
+
58,000,000
5,223,938
3. Department of Justice (tastading the Judistary)
20,315,635
17
.
16,500,000
4,914,725
6. Department of taber
15,400,920
14
19,152,713.34
19,500,000
19,203,361.73
+
130,664.39
7. Department of State
150
150,310,360
178,949,481
.
149,000,000
4a
12,639,121
8. Presenty Department
35,432,065.94
$5,000,000
15,000,000
,
20,432,065.94
Public buildings
130
183,819,657
145,000,000
101,522,999
"
#
2,296,698
9. Net Department (somilitary)
1,183,006
Passes Canal
10,573,760
10,400,000-
- 11,750.00
.
25
52,317,000
.
10. Mural Electrification Administration
31,520,000
8,000,000
$0,797,000
40
40,166,270
$2,000,000
-
11. Termassee Valley Authority
43,000,000
1,833,730
If
12. United States Waritine Commission
-
35,000,000
153,069,943
+ 153,869,963
48
13. Other Independent offices and commissions
50,954,168
47,500,000
52,752,000
-
1,797,860
- 2
-
18,515,363
-
11,232,690
14. Post Office Department, deficiency
29,748,053
7,500,000
4
.
5,000,000
2,500,000
15. District of Celumbia, contribution
5,000,000
Total, Legislative, civil departments and
1,192,116,966.91
1,668,400,000
1,674,886,645.17
1,238
(16%
agencies and the juliciary
donal Defease:
526,943,308
629,665,104
560
-
1. Bary Department
540,000,000
103,121,796
4W
415.261.154
385,000,000
487,453,043
+
11.18.15
8. for Department
Total, national defense
$41,806,462
525,000,000
1,117,115,147
985
.
173,311,685
580,000,000
573,022,500
SS#
-
12,809,500
Telephone' Administration
583,832,000
É
adjustment Program
125,097,214
140
*
16,201,064
les. y. Les 8/24/35 (yos of Customs)
108,899,150
475,000,000
RES,100,000
440
-
Miss.
126,006.42
Total, Agricultural Adjustment Progres.
655,100,692
475,000,000
613,197,214
580
-
350,000,000
310,000,000
325,006,383
290
-
19,993,617
la Conservation Corpo
11.
25,799,229
so
+
1,164,239
- administrative expenses
23,631,000
20,000,000
STATE
130,000.000
194,454,000
in
.
141.018.122
&
620,753,229
145
-
now, Social Security
275,046,678
150,000,000
165,206,551
FIL. termers as the public debt
$25,000,000
971,000,000
971
-
46,000,000
925,000,000
16
HIS.
16,000,000
16,000,000
16,000,000
1. Customs.
30,000,000
30.000.000
16,050,000
16
+
6,250,000
I -
51
Total, refunds
N5,000,000
$6,000,000
52,850,000
.
6,050,000
UNITED I 1 di
1. AREA
35,000,000
21,200,000
-
11,000,000
(1) Federal land fusice
(39,322,786)
(24,322,786)
as
55,000,000
(a) Federal Farm kripp Ourporation, returnion
8,350,000
-
1,350,000
is interest rates
5,000,000
29,550,000
.
12,700,00
40,000,000
55,000,000
we
Total. agricultural side
(39,322,786)
(24,322,786)
c. belief
(12,740,007)
8,000,000
(10,740,007)
A
Regraded Unclassified
- of united APPROVALITION AND
FINCAL TRAIN 1938 - 1938
208
FISCAL THA 1938
FINCAL THAN 1939
Insurence (*) OF 4
Orness (-) him
Appropriations (issiviling M-
1 & I
1938 appropriations
propristions -
- 1939 suppopria-
- of -
commissione
-
time collectes
COME
IL insurery - salief
3. Public verket
15
(1) expenses, Public lado
15,000,000
.
(15,000,000)
30
administration
(139,184,326)
100,000,000
(43,209,425)
20
(2) maile bighways.
30,000,000
(3) liver 1 barber werk and flood control
(30,297,231)
85,000,000
(05,297,231)
22
(4) and clastrification deductration
21050,000,000
- 300,000,000
1,300,000,000
1,275,000,000
1,700
(5) Fragress Administration
(151,078,597)
(216,078,597)
-
R2,000,000
(6) Other paille escka (mational datence, public build-
62,000,000
200,000,000
(67,339,421)
50
Ingl. ess.)
(145,339,481)
1,000,000,000
- 382,000,000
1,382,000,000
1,845,000,000
(391,063,000)
}
1230
Total, public warks
(654,063,000)
/
by All to -
(5,041,07%)
4,000,000
(1,041,874)
15
(1) gie.
(55,045,594)
35,000,000
(20,045,998)
(2) imargency bruelag
7
(10,000,000)
10,000,000
-
(3) rederal Housing
- 118,000,000
118,000,000
125,000,000
we
(4) Revettienent Security Adalnistration
(97,011,775)
- 118,000,000
118,000,000
174,000,000
Total, aid se bose-remers
(169,098,406)
(113,098,406)
64
9.
(62,244)
-
(62,244)
-
(1) administration for Intestrial incovery
1,029,550,000
- $10,450,000
1,580,000,000
Total, recevery and relief
1,576,000,000
(539,286,443)
1341
(675,266,443)
- devolving funds (not):
1. tericultural aid:
$0
(1) Community Gradis Carparation
(211,988,637)
100,000,000
(111,988,637)
(69,431,298)
a/10,000,000
(79,431,294)
$10
(2) farm Drwdit idelaistration
Total, agricultural add
(251,419.935)
30,000,000
(191,419,935)
40
1. Public workst
(1) Leans - granse to States, unicipalities, ord.
(357,498,809)
200,000,000
(197,498,609)
150
(2) Loans to reilreads
J.
I
(1) (spart-Impert Bank of Enchington
(28,083,425)
-
(26,083,425)
(2) incometruction Pinence Corporation (dirent laune
and sentiture)
1/
a/150,000,000
as
5,00
Total, miscellansous
(28,08),425)
a/150,000.000
(28,083,425)
Total, revolving funds
(707,002,169)
140,000,000
(417,002,169)
90
11. Transfers to trail accounts,
1. Cld-age reserve account
510,000,000
510
*
500,000,000
$25,000,000
10,000,000
n/
23,310.077
3. failred Retirement assount
144,310,077
138,000,000
121,000,000
.
3- Government employees' retirement funds (Unised Bates sharg)
71.255.000
71,294,600
71
-
71,255,000
hop
717,565,077
636,255,000
704,254,600
704
-
13,320,477
Total, transfers to trail ass
111. Pupplemental 15em
180,000,000
not
7,4,6,936,718.17
-
Total (seciuding lebs restrument)
7,345,655,000
(956,208,612)
7,245
(1,582,283,612)
594.6
liet deficit
695,265,000
582,515,000
591,515,000
592
. 9,000,000
XIII. retirement
205,000,000
8,061,453,718.17
7,417
-
Total
7,995,655,000
(1,582,258,612)
(956,258,612)
1,186.6
leans definess
$95,285,000
Scaless of credite. (nduct.
The teamstration Finance Corporation 14 anthorized to
- from the Treasury le may the requirements.
.1.
Regraded Unclassified
COMPARISON OF EXPENDITURES FOR THE FIRST TWO MONTHS OF THE FISCAL YEAR 1938 WITH THE
CORRESPONDING PERIOD IN THE FISCAL YEAR 1937 (GENERAL AND EMERGENCY FUNDS COMBINED WHERE POSSIBLE.)
July 1 to
July 1 to
Increase (f)
Aug. 31, 1936
Aug. 31, 1937
Decrease (-)
Civil Departments and Agencies
103,983,925.61
120,181,316.19
+ 16,197,390.58
Social Security Act
25,523,482.27
46,583,075.29
t 21,059,593.02
National defense:
Army
66,548,676.91
67,796,868.49
t 1,248,191.58
Navy
77,447,433.21
90,312,548.47
f 12,865,115.26
Veterans' Administration
96,399,322.22
97,070,652.92
t
671,330.70
Agricultural Adjustment Program
57,774,703.58
37,607,587.05
- 20,167,116.53
Civilian Conservation Corps
23,806,529.79
63,231,634.84
+ 39,425,105.05
Farm Credit Administration
10 8,726,011.68
a 4,757,800.42
t
3,968,211.26
Interest on the public debt
35,787,357.67
32,970,157.67
- 2,817,200.00
Refunds
9,599,738.01
7,967,674.89
- 1,632,063.12
Federal land banks
11,844,262.51
9,917,190.88
- 1,927,071.63
Relief
49,202,191.14
839,567.17
- 48,362,623.97
Public works (including work relief):
Reclamation projects
3,524,366.01
11,541,013.66
+ 8,016,647.65
Public buildings
3,052,009.56
7,585,533.24
t 4,533,523.68
Public highways
76,366,372.03
52,048,363.74
-24,318,008.29
River and harbor work and flood control
46,128,071.90
35,472,514.05
- 10,655,557.85
Rural Electrification Administration
650,299.83
4,244,973.76
t 3,594,673.93
Works Progress Administration
314,680,469.65
235,034,721.01
- 79,645,748.64
Tennessee Valley Authority
3,789,614.02
7,025,954.37
t 3,236,340.35
Loans and grants to States, etc
45,415,298.19
37,167,593.60
- 8,247,704.59
Loans to railroads
157,950.78
¥76,579.88
-
234,530.66
All other
67,674,731.32
44,084,719.54
- 23,590,011.78
2,495,751.19
1,516,640.58
-
Home loan system
979,110.61
Emergency housing
4,957,692.67
11,362,745.74
t 6,405,053.07
Federal Housing Administration
2,346,018.61
2,647,806.25
t
301,787.64
Resettlement Administration
23,429,757.05
32,231,280.23
t 8,801,523.18
Administration for Industrial Recovery
5,006.34
a 5,425.74
-
10,432.08
Commodity Credit Corporation
all 66,406,100.51
a 1,129,304.07
t 65,276,796.44
t
Export-Import Bank of Washington
a 466,446.60
a 95,119.48
371,327.12
Reconstruction Finance Corporation
a199,961,994.75
a21,900,175.32
/178,061,819.43
028.8
151.5
Transfers to trust accounts, etc:
877
83,000,000.00
+ 83,000,000.00
-
Old age reserve account
-
Railroad retirement account
30,000,000.00
t 30,000,000.00
Adjusted service certificate fund
39,753,332.48
-
- 39,753,332.48
Government employees' retirement funds (U.S. Share)
46,735,300.00
73,255,000.00
+ 26,519,700.00
963,519,111.01
1,214,732,728.72
4251,213,617.71
Subtotal
23,128,350.00
30,550.00
- 23,097,800.00
Debt retirements
986,647,461.01
1,214,763,278.72
/228,115,817.71
Total expenditures
a Excess of credits, deduct.
209
Regraded Unclassified
210
Telephone conversation between Mr. Mulligan, Treasurer of the Reconstruction
Finance Corporation, and Mr. Bartelt, September 27, 1937.
Mr. Bartelt: I was Just down with the Secretary of the Treasury and he told
me that he is going to have & conference with Mr. Jones tomorrow,
He wanted to know if you would have Mr. Jones bring with him
commitments outstanding against your balances, In connection
with that I would like to ask you A. question or two.
You expect to make payments this year of about $400,000,000 and
your receipts from figures we have are estimated at $550,000,000,
leaving net receipts over payments of $150,000,000.
Mr. Mulligan: I am going over the thing again today and I'll be able to give
you a better idea of it then. That was made sometime ago and
I want to go over the figures before I say anything.
Mr. Bartelt: Will Mr. Jones have that?
Mr. Mulligan: I don't know. If he wants it he will, I'm going to start
right now,
Mr. Bartelt: Will you have him bring it with him?
Another thing, Mr. Mulligan, do you know of any way in which
the Reconstruction Finance Corporation can turn the proceeds
of its sales into the Treasury 80 as to avoid respending the
money by the Public Works Administration?
Nr. Mullican: I don't know of any way. We can buy securities from them,
Mr. Bartelt: Do you know of any way in which they would not be able to use
the money?
Mr. Mulligan: I know of no way it could be done. We buy from the Public
Works Administration. We have no control over the money from
that point on. Mr. Claude Hamilton, the General Counsel, may
be able to help you.
Mr. Bartelt: When you sell those securities can the money be turned into
the Treasury?
Mr. Mulligan: It is turned into the Treasury.
Mr. Bartelt: It goes-to your account?
Mr. Mulligan: You get it all, The only difference is our debt to you, When
we sell to the Public Works Administration it increases our
debt to you,
Mr. Bartelt: Would that be available for expenditure again?
Mr. Mulligan: Under the original law we were authorized to buy from the
Regraded Unclassified
2.
211
Public Works Administration but not over $250,000,000.
This was later increased to $400,000,000. Beyond that
we can't go.
Mr. Bartelt: When you buy the securities from Ickes you give him a check
and when you sell the securities you deposit that in the
Treasury. I was wondering if there was some step in there
that I had overlooked.
Mr. Mulligan: I don't think 80. You seem to have a good idea of the
thing.
Mr. Bartelt: The Secretary would like for Mr. Jones to bring those figures.
date?
212
Receipts and Expenditures estimated by the
Reply Rept 27
Reconstruction Finance Corporation
compared with actual
(In millions of dollars)
1936
1937
Fiscal year 1936
Budget
Budget
Actual
Receipts
327.0
656.1
1,164.1
Expenditures
712.1
1,222.6
925.4
Excess of receipts
--
---
238.7
Excess of expenditures
385.1
566.5
---
1937
1938
Fiscal year 1937
Budget
Budget
Actual
Receipts
290.6
715.8
739.4
irpenditures
806.1
514.6
405.5
Excess of receipts
---
201.2
333.9
Excess of expenditures
515.5
-
-
Fiscal year 1938
Cash withdrawal
July and August
statement
Actual
eceipts
57.2
167.2
upenditures
91.9
145.3
Excess of receipts
--
21.9
Excess of expenditures
34.7
--
Regraded
Unclassified
213
guied upon getimates contained
COMPUNITIVE JULYSIS or e washing.
is President's Medicage of April
(Arranged according to discomention shows 00 PACK
D. 1937.
t of daily Treasury
1
July and suchs, 1937.
2
Please The 1958.
Payments.
:
collegions. et
a
list
Expenditions.
Payments,
F Ampaymente and :
just
SEVERAL JD SPECIAL ACCOUNTS.
collections.
Expenditures.
(mentitures)
1- General:
Departmental
Public buildings
= 108,586,799
3 1903,872
Public
7,585,533
4 108,653,927
+ 641,198,100
-
River and herber work and flood control
32,538,861
7,585,003
$ 9,550,100
$5,000,000
8. 638,545,000
29,860,610
32,028,861
I
-
Reclamation projects
155,000,000
42,000,000
-
20,008,610
I
155,000,000
Paname Canal
6,115,417
162,000,000
-
6,115,417
I
Postal deficiency
2,309,542
40,000,000
142,000,000
-
9,368,754
2,309,845
I
Bailmand Detirement Let
10,400,000
40,000,000
I
I
871,012
9,360,754
30,000,000
10,400,000
Social Security lot
I
!
46,052,075
072,812
2,800,000
50,000,000
District of Columbia (U. 3. stare)
-
-
$6,553,075
5,000,000
506,000,000
2,200,000
National defense:
-
-
5,000,000
5,000,000
$06,000,000
-
Any
5,000,000
Havy
67,795,860
-
90,312,546
67,796,868
293,000,000
-
Veterens' Administration
I
Agricultural Adjustment Progres
97,070,655
90,212,548
560,000,000
295,000,000
-
1
36,717,827
97,070,603
580,000,000
560,000,000
I
Civilian Conservation Dorge
I
30,717,827
$80,000,000
63,231,635
496,500,000
I
Parm Credit Administration
-
43,251,635
499,500,000
3,990,714
350,000,000
Termeses Valley Authority
2,875,951
-
1,116,783
200,000,000
Interest on the Public Debt
7,020,954
54,567,000
7,025,354
10,567,000
-
Refunds:
28,970,108
49,000,000
44,000,000
-
-
32,970,150
49,000,000
850,000,000
I
360,000,000
Curtome
2,377,095
Internal revenue
I
2,377,095
5,520,585
17,000,000
I
-
5,090,588
19,000,000
Processing tax on farm products
36,000,000
889,760
I
mo,960
$6,000,000
-
42,000,000
-
$2,000,000
Subtotal
555,799,477
6,886,605
646,973,674
4,634,862,100
19,117,100
4,515,746,000
11. Recovery end relief:
Agricultural ed.d:
Federal land been
9,917,191
-
9,917,191
24,000,000
Belief
-
24,000,000
639,567
-
639,567
-
I
Public works (iscluding work relief):
I
Reclamation projects
5,425,597
-
5,425,097
15,000,000
I
15,000,000
Public highways
19,009,800
I
19,009,000
150,000,000
1
189,000,000
River and barter work and flood control,
6,803,904
1
6,603,904
80,000,000
-
50,000,000
Rural Elactrification Administration
4,244,974
-
4,244,974
3,000,000
I
5,000,000
Works Progress idministration
235,034,721
1
125,054,721
1,500,000,000
I
1,500,000,000
All other
44,108,694
17,974
44,084,720
168,040,000
60,000
162,000,000
asd to has
How loss system
1,516,641
-
1,515,641
2,000,000
I
8,000,000
Resrgency housing
11,562,746
-
11,362,745
50,000,000
I
30,000,000
Federal Housing administration
3,844,778
1,195,972
2,647,806
25,000,000
10,000,000
15,000,000
Desattlement Administration
52,251,280
-
32,831,280
151,000,000
-
131,000,000
Miscellensous:
Aministration for Industrial Recovery
a 5,426
-
à 5,488
I
-
1
Subtotal
......
374,528,169
1,214,946
373,413,223
1,042,040,000
10,040,000
1,852,000,000
111. Revolving funds: (art)
Agricultural a14:
Ommodity Gredit Corporation
1,730,756
2,860,040
1,189,304
10,000,000
40,000,000
a $2,000,000
Farm Credit administration
3,300,000
2,069,070
5,074,585
188,687
13,182,687
4. 15,000,000
Public Marks:
Love et greate to States, municipali-
tion, etc.
41,276,854
4,209,252
37,167,094
880,500,000
100,000,000
180,500,000
10,590
87,170
=
76,500
I
Loans se reilroads
500,000
1
000,000
Missellansous:
&port-Deport Bank of Washington
...
20,217
113,339
.
95,119
2,000,000
1,000,000
1,000,000
Recomitruction Finance Corporation
direct loans and expenditures
145,540,073
167,260,748
1 21,900,175
400,000,000
650,000,000
a 150,000,000
Dubtotal
188,173,644
177,081,635
8,091,081
561,502,687
704,682,827
4 12,000,000
LV.
Transfere to trust accounts,
as,000,000
$2,000,000
540,000,000
-
540,000,000
-
01d-age passeve account
Builread retirement appount
20,000,000
I
20,000,000
25,000,000
-
25,000,000
-
I
I
60,000,000
-
50,000,000
Adjusted service certificate fund
Dovertment employees' retireet funds
(0. a. share)
75,256,000
75,250,000
1
73,865,000
73,258,000
-
Subtotal
166,255,000
-
186,855,000
445,350,000
1
Total agentitares excluding dabs retire-
1,401,868,112
107,185,500
1,814,728,789
7,584,000,000
IN
I
ma,114,110
I
-
418,000,000
I
Deficit
. Done credita, Ambert.
5 countries min,
Regraded Unclassified
ACCOUNTS AND DEPORITS,
September 27, 1937.
PUBLIC WORKS EXPENDITURES 1938
Amount avail-
Balance avail-
Unliquidated
able for cash
Cash Withdrawal Estimatos
able for cash
obligations
withdrawal in
April 20
Sept. 1
Present
withdrawal in
carried into
1938
1939
1939
1. General Public Worke Program items
Public Buildings
130,197,066
45,000,000
45,000,000
45,000,000
85,197,066
72,619,257
Public Highways
186,151,000
153,000,000
153,000,000
153,000,000
33,151,000
225,239,500
Rivers and Harbore & Flood Control
(improvement)
218,000,000
127,000,000
105,000,000
105,000,000
113,000,000
81,921,942
Other
185,573,314
115,000,000
100,000,000
96,000,000
89,573,314
81,951,775
Total, General Public Works Program
719,921,380
440,000,000
403,000,000
399,000,000
320,921,380
461,732,474
2. Emergency Fund expenditures supplemental to
above -
Public Buildings
26,805,824
10,000,000
15,000,000
10,000,000
16,805,624
16,069,957
Public Highways
155,906,700
130,000,000
100,000,000
100,000,000
55,906,700
55,906,700
Rivers and Harbors and Flood Control
60,794,415
20,000,000
30,000,000
25,000,000
35,794,415
6,109,065
Other
31,139,898
15,000,000
15,000,000
15,000,000
16,139,898
16,108,505
Total, Emergency
274,646,837
175,000,000
160,000,000
150,000,000
124,646,837
94,194,530
3. Additional public works included in
statement of Mr. Hase -
Rivers and Harbors Vaintenance
45,765,000
35,000,000
38,000,000
38,000,000
7,765,000
3,650,000
55,034,074
30,000,000
35,000,000
35,000,000
20,034,074
19,000,000
Emergency Housing
P.W.A. grants and administrative expenses.
405,791,064
225,000,000
250,000,000
215,000,000
190,791,064
190,791,064
506,590,138
290,000,000
323,000,000
288,000,000
218,590,138
213,441,064
Total Additional
Total items 1 to 3
1,501,158,355
905,000,000
586,000,000
837,000,000
664,158,355
769,368,068
4. Other items in nature of public works -
23,075,550
19,000,000
18,000,000
18,000,000
5,075,550
5,075,550
Soil erogion
9,878,000
9,000,000
8,000,000
8,000,000
1,878,000
1,695,000
Army construction
9,387,000
6,000,000
6,000,000
6,000,000
3,387,000
7,165,000
Navy - Yards and Docks
3/35,000,000
3/35,000,000
-
21,000,000
2/21,000,000
P.W.A. loans
1,000,000
3,000,000
32,000,000
31,340,550
13,934,550
63,340,550
Total other items
1,564,498,805
904,000,000
883,000,000
869,000,000
695,498,905
783,302,618
Grand Total
The 1939 authorization of $216,000,000 will also be an outstanding obligation under the highway act.
Also $129,000,000 in bonds.
Excess of credits deduct.
Regraded Unclassified
215
PUBLIC WORKS ADMINISTRATION REVOLVING FUND
Cash Account
(Millions)
Cash balance June 30, 1937
$ 246
Cash to be received from sales to Reconstruc-
tion Finance Corporation:
1938
$ 150
1939
100
250
496
Payments for grants:
1938
$ 88
1939
128
Payments for administrative expenses:
1938
15
1939
9
240
Available for loans
256
Payments for loans:
1938
148
1939
62
210
Cash balance (estimated June 30, 1939)
.
46
Accounts and Deposits
September 29, 1937
Regraded Unclassified
216
PUBLIC WORKS ADMINISTRATION REVOLVING FUND
Summary
Cash
Securities
On hand June 30, 1937
246
+ 129
Sale of Securities to RFC
1938
+ 150
- 150
1939
+ 100
- 100
Total funds available
496
Disbursements
Grants -
1938
88
-
1939
128
-
Administrative expenses
1938
15
-
1939
9
-
Loans
1938
148
+ 148
1939
62
+ 62
Total disbursements
450
On hand June 30, 1939:
Cash
46
-
Securities
-
89
46
135.
A ccounts & Deposits
September 29, 1937.
217
Major Construction Items
(In millions of dollars)
Present
April 20,
estimate
1937
Increase (+)
(Sept, 1939)
Estimate
Decrease (-)
General:
Public buildings
45.0
45.0
-
Public highways
153.0
153.0
I
Rivers and harbors
105.0
127.0
- 22.0
Reclamation
35.0
40.0
- 5.0
National Park service
4.0
4.5
- .5
Indian service
5.0
5.5
- .5
Tennessee Valley Authority
...
40.0
49.0
- 9.0
Sub-total
387.0
424.0
- 37.0
All other
12.0
16.0
- 4,0
Total general
399.0
440.0
- 41.0
Emergency:
Public buildings
10.0
10.0
-
Public highways
100.0
130.0
- 30.0
Rivers and harbors
25.0
20.0
+ 5.0
Reclamation
15.0
15.0
-
Total emergency
150.0
175.0
- 25.0
Grand total
549.0
615.0
- 66.0
September 27, 1937.
218
MAJOR CONSTRUCTION APPROPRIATIONS
Cash Withdrawals - General Funds
Public Buildings:
1. Admiral Peoples' memorandum of September 16 to the Secre-
tary of the Treasury shows present estimated cash withdrawals of
$3,800,000, or about 16 per cent of the appropriation. This 18 a
kind of appropriation that does not call for large expenditures
during the year for which the appropriation is made. The purchase
of sites and preparation of plans and specifications require some
time and represent a relatively small percentage of the total ap"
propriations for the buildings. AS a matter of fact, only about
12 per cent of the appropriation of $60,000,000 for 1937 was ex-
pended during that year: and only about 9 per cent of the same
appropriation for 1936 was expended during that year.
In addition to the $23,000,000 appropriation for 1938, there
was available at the beginning of the present fiscal year $90,000,000
of previous year appropriations for this purpose.
2. This appropriation in the amount of $2,325,000 is for
completion of the Bureau of Engraving and Printing annex. The
contractor is well up with his schedule and it is now expected
that the building will be completed in April: and that this progress
makes necessary 8. revised estimate of cash withdrawals on this
account of $2,000,000 by June 30, next.
3. A check for $10,107,066 has already been drawn and cashed.
Public Highways:
4, 5. 6, 7. and 8. On the basis of the present departmental
estimates of expenditure, all this $180,000,000 will be paid out
by June 30, 1938, and there will also be paid out by that date
$100,000,000 of emergency funds. (This $100,000,000 represents
payments to the States in the amount of $120,000,000 less return
of $20,000,000 previously advanced to the States).
On this basis there would remain on June 30, 1938, unliquidated
obligations incurred during that year by the States under the High-
way Acts of $177,000,000 out of the general funds, and $23,000,000
out of emergency funds. (By January first, next, an additional
$216,500,000 will be by law apportioned for obligation by the States
on account of the 1938 authorisation).
The present budget estimate of expenditures for the fiscal year
1938 is $253,000,000. or $27,000,000 less than the departmental esti-
mate of expenditures under both the general and emergency funds. It
is not believed that the departmental estimate can be safely discounted
in an amount greater than $27,000,000.
Regraded Unclassified
218
- 2 -
Rivers and Harbors, and Flood Control:
9. 10 and 11. Out of 8. total availability for cash withdrawal
in 1938 of $218,000,000, the Department had estimated actual cash
withdrawals of $127,000,000, which figures our present Budget our
vey place at $105,000,000. This present estimate of $105,000,000
represents $60,000,000 in cash withdrewale from unliquidated obli-
gations brought into 1938 and $45,000,000 of cash withdrawals from
the 1938 appropriations of $142,500,000. The proposed reduction
of $22,000,000 from the department's estimate of cash withdrawals
for 1938 is based upon the assumptions that reserves of $34,000,000
can be maintained and that there will be considerable delay in the
flood control construction program in connection with the securing
of rights-of-way, in particular, those that are to be supplied by
local interests.
Of a cash withdrawal availibility of $61,000,000 in emergency
funds for river and harbor, and flood control, work in 1938, the
department has estimated withdrawnls of $31,000,000. Our present
Budget estimate of cash withdrawals of emergency funds for this
purpose for 1938 is now placed at $25,000,000, or $6,000,000 less
than the departmental estimate. This is due in part to our belief
of probable delays in securing rights-of-way for flood control con-
struction, and in part to the inability to meet relief labor require-
menta of the Works Progress Administration.
Reclamation Service:
12 and 13. The possibilities with respect to delaying con-
struction work, and hence reducing cash withdrawals for 1938, on
the larger reclamation projects, are somewhat limited by the fact
that these projects have been started in previous years and are
now under way. There are, however, some possibilities along this
line that are dependent upon securing rightm-of-way and the signing
of repayment contracts.
Of a total amount of $83,784.000 available for cash withdrawal
for 1938, which includes unexpended balances of previous years' ap-
propriations ae well as the 1938 appropriation, the Department had
estimated cash withdrawals in 1938 of $48,328,000. In our present
survey of lower cash withdrawal possibilities for 1938, we have
placed the figures at $35,000,000. Of this amount $20,000,000 would
be on account of cash withdrawal balances brought into 1938, and
$15,000,000 would be out of the 1938 appropriations of $39,215,000.
These present Budget cash withdrawal figures are low figures.
To realize them will require, it is thought, a further going over
of the figures with the Reclamation Service under instructions to
that service to somewhat delay its construction program.
220
- 3 -
The Reclamation Service has a 1938 available cash withdrawal
amount in emergency funds of $31,139,000, and while it originally
estimated a cash withdrawal from these funds of $26,765,000, our
present Budget estimate of cash withdrawals of emergency funds
for 1938 is down to $15,000,000. The same comment with respect
to our present estimate of cash withdrawals from general funds
applies to our ability to realize as low a cash withdrawal amount
of emergency funds as $15,000,000.
National Park Service:
14. It is now estimated that of this 1938 appropriation of
$10,500,000 for National Park roads and parkways, there will be
cash withdrawals by the end of the year of about $2,500,000.
Indian Service:
15. On the basis of a revised estimate of cash withdrawals
under these roads and construction appropriations for the Indian
Service for 1938. it is believed that not more than $5,000,000
will be paid out by the end of the year.
Tennessee Valley Authority:
16. Of the amount of $52,233,000 available for cash withdrawal
during the fiscal year 1938, the Authority had estimated withdrawals
of $45,000,000 for the year. The lowest figures that we could now
estimate for 1938 cash withdrawals would be $40,000,000. of which
$35,000,000 would represent a cash withdrawal amount from the 1938
appropriations of $40,166,000.
the
MAJOR CONSTRUCTION APPROPRIATIONS
Cash Withdrawals - General Fund
Amount available
Estimated Cash Withdrawal 1938
Estimated cash withdrawal from
for cash with-
By depart-
Current Budget
drawal
am
Appropriated
1938 appropriations
ments
satimate
for 1938
Current Budget
1938
(Form A)
&/177
1957
By departments
estimate
Public Buildingsr
is
Outside the District of Columbia
113,569,000
62,000,000)
23,000,000
15,000,000
3,800,000
1
In the District of Columbia
6,521,000
3,860,000)
45,000,000
116
2,425,000
1,448,000
2,000,000
2
Grand Central Station, P. O,, New York
10,107,066
10,107,066)
10,107,066
10,107,066
10,107,056
3
Total
130,197,066
75,967.066
45,000,000
35,532.066
26,555,066
15,907,066
Public Highways:
Federal Aid Highway System
154,647,000
150,000,000)
150,000,000
150,000,000
125,000,000
4
Secondary or feeder roads
5,000,000
5,000,000)
5,000,000
5,000,000
4,500,000
5
Elimination of grade crossings
10,000,000
10,000,000)
153,000,000
153
10,000,000
10,000,000
9,000,000
6
Public land highways
3,004,000
2,500,000)
2,500,000
2,500,000
2,500,000
7
Forest roads and trails
13,500,000
13,500,000)
12,500,000
12,500,000
12,000,000
8
Total
186,151,000
181,000,000
153,000,000
180,000,000
180,000,000
153,000,000
Rivers and harbors and flood control:
Improvement of rivers and harbors
150,000,000
73,000,000)
90,000,000
20,000,000
18,000,000
9
Flood Control Act June 22, 1936
30,000,000
25,000,000)
105,000,000
30,000,000
25,000,000
15,000,000
10
Flood Control Mississippi River
38,000,000
29,000,000)
22,500,000
13,500,000
12,000,000
11
218,000,000
127,000,000
105,000,000
127
142,500,000
58,500,000
45,000,000
Total
Reclamations
Boulder Canyon project
13,601,863
9,000,000)
to
4,050,000
12
39,328,000)
35,000,000
35,165,000
19,000,000
15,000,000
13
Other
70,183.075
19,000,000
15,000,000
Total
83,764,938
48,328,000
35,000,000
39,215,000
National Park Service
14,000,000
6,500,000
4,000,000
4/5
10,500,000
3,000,000
2,500,000
14
5.5
6,877,775
7,216,775
6,692.775
5,000,000
Indian Service
7,401,775
5,000,000
15
Tennessee Valley Authority
52,233,000
40,000,000
Hq.
40,166,270
32,912,250
35,000,000
16
44,978,990
691,767,779
490,651,831
387,000,000
Ant.
455,130,111
326,660,101
271,407,066
GRAND TOTAL
1%
16
are the
349
stolo
Regraded Unclassified
222
MAJOR CONSTRUCTION ALLOCATIONS
Cash Withdrawals - Emergency Funds
Amount available
Estimated cash withdrawal 1938
for cash withdrawal
By departments
Current Budget
am
1938
(Form A)
1937
estimate
Public buildings:
Act June 19, 1934
$
15,726,742
$ 10,000,000
N.I.R. funds including
New Interior Building
6,543,084
4,000,000
$ 10,000,000
P.W.A. allotments
4,535,998
2,536,564
Total
26,805,824
16,536,564
$ 10,000,000
Public highways:
N.I.R. highway funds
$
14,111,100
$ 11,171,500
N.I.R. Forest highways
44,100
44,100
100,000,000
130
Emergency relief, Highways, grade
crossing elimination
133,537,000
101,000,000
Emergency relief, Highways, roads
and streets
8,214,500
8,214,500
Total
155,906,700
120,430,100
100,000,000
Rivers and harbors and flood control
Emergency relief, flood control,
Miss. River and tributaries, 1938
15,000,000
-
Emergency relief, rivers and harbors,
and flood control, 1935 - 1937
7,686,709
7,686,709
Emergency relief, flood control,
general (Act 7/19/37) 1938
30,000,000
15,000,000
Emergency relief, flood control
25,000,000
20
and other conservation
632,933
632,933
N.I.R. flood control, 1933 - 39
7,474,773
7,474,773
Total
60,794,415
30,794,415
25,000,000
Reclamation:
N.I.R. Boulder Canyon project, inc.
All American Canal
994,381
994,381
P.W.A. Boulder Canyon
578,506
575,000
N.I.B. Parker Gila project
31,090
-
15,000,000
N.I.R. Reclamation, 1933 - 39
10,200,000
9,000,000
Emergency relief, Boulder Canyon
2,995,921
2,995,921
Emergency relief, other reclamation
16,340,000
13,200,000.
Total
31,139,898
26,765,302
15,000,000
274,646,837
150,000,000
175
Grand Total
194,526,381
223
PUBLIC WORKS ADMINISTRATION REVOLVING FUND
Securities Account
(Millions)
Securities on hand, June 30, 1937
$ 129
Securities to be purchased from public bodies:
1938
$ 148
1939
62
210
Total securities
339
Securities to be sold to Reconstruction
Finance Corporation:
1938
150
1939
100
250
Securities which will be on hand
June 30, 1939
89
Accounts and Deposits
September 29, 1937
224
no date
Regraded Unclassified
Actual expenditures of the Government for fiscal years 1926-1937
(Classifications include expenditures from both general and emergency funds)
225
(In millions of dollars)
I
Total
#
Total
#
Total
I
Aggregate
:
1926-1929
:
1930-1933
I
1934-1937
:
1926-1937
Regular operating expenditures:
Legislative, judicial and civil establishments
2,816.0
3,256.7
2,749.1
5,821.8
National defense
2,466.8
2,775.9
3,096.9
8,339.6
Veterans' pensions and benefits
(excluding bonus prepayment)
2,829.3
3,541.1
2,415.2
8,785.6
Interest on the public debt
3,029.0
2,559.6
3,193.3
8,781,9
Total
11,141.1
12,133.3
11,454,5
34,728.9
Public works:
Public buildings
47.1
303.1
281.0
631.2
Public highways
377.9
651.8
1,179.7
2,209.4
Rivers and harbors
292.0
463.0
812.5
1,567.5
PVA (grants and admin. expenses)
-
-
574.6
574.6
Other
31.7
76.4
362.0
470.1
Total
748.7
1,494.3
3,209.8
5,452.8
Unemployment relief:
Direct relief
-
350.7
3,355.4
3.706.1
Work relief
-
-
3,977.5
3,977.5
Civilian Conservation Corps
-
-
1,639.5
1,639.5
Total
-
350.7
8,972.4
9,323.1
Agricultural adjustment program
-
-
2,098.7
2,098.7
Social Security
-
-
476.2
476.2
Miscellaneous
-
-
36.6
36.6
Total nonrecoverable expenditures (excluding
bonus and debt retirement)
11,889.8
13,978.3
26,248.2
52,116.3
Loans (net)
5.6
1,666.2
456.9
2,128.7
Subscriptions to capital stock
6.0
737.7
1,089.7
1,833.4
Total expenditures (excluding bonus and
debt retirement)
11,901.4
16,382.2
27,794.8
56,078.4
Bonus prepayment
-
I
2,230.2
2,230.2
Debt retirement
2,096.9
1,868.2
1,440.7
5,405.8
Total arpenditures
13,998.3
18,250.4
31,465.7
63,714.4
Regraded Unclassified
226
Actual expenditures of the Government for fiscal years 1926-1929
(Classifications include expenditures from both general and emergency funds)
(In millions of dollars)
:
1926
:
1927
:
1928
:
1929
:
Total
Regular operating expenditures:
Legislative, judicial and civil establishments
666.9
589.4
708.6
851.1
2,816.0
National defense
579.7
584.4
624.6
678.1
2,466.8
Veterans' pensions and benefits
(excluding bonus prepayment)
650.5
721.8
723.9
733.1
2,829.3
Interest on the public debt
831.9
787.0
731.8
678.3
3,029.0
Total
2,729.0
2,682.6
2,788.9
2,940.6
11,141.1
Public Works:
Public buildings
2.1
7.8
6.7
30.5
47.1
Public highways
98.8
92.5
91.1
95.5
377-9
Rivers and harbors
70.3
65.4
72.9
83.4
292.0
PWA (grants and admin. expenses)
-
-
-
I
-
Other
3.4
5.2
9.5
10.6
31.7
Total
174.6
173.9
180.2
220.0
748.7
Unemployment relief:
Direct relief
-
-
-
-
-
Work relief
-
I
-
#
-
Civilian Conservation Corps
-
I
-
#
-
Total
-
.
-
-
,
-
Agricultural adjustment program
-
-
-
-
-
Social Security
-
-
-
-
1
Miscellaneous
1
-
-
-
-
Total nonrecoverable expenditures (excluding
bonus and debt retirement)
2,903.6
2,856.5
2,969.1
3,160.6
11,889.8
Loans (net)
-
,
-
5.6
5.6
Subscrip.ions to capital stock
-
1.0
-
5.0
6.0
Total expenditures (excluding bonus
and debt retirement)
2,903.6
2,857.5
2,969.1
3,171.2
11,901.4
Bonus Prepayment
-
I
-
-
Debt retirement
487.4
519.6
540.3
549.6
2,096.9
Total expenditures
3,391.0
3,377.1
3,509.4
3,720.8
13,998.3
Regraded Unclassified
Actual expenditures of the Government for fiscal years 1930-1933
227
(Classifications include expenditures from both general and emergency funds)
(In millions of dollars)
:
:
:
1930
:
1931
:
1932
:
1933
:
Total
Regular operating expenditures:
Legislative, judicial and civil establishments
789.5
790.9
978.8
697.5
3,256.7
National defense
701.3
699.2
707.6
667.8
2,775.9
Veterans' pensions and benefits
(excluding bonus prepayments)
753.5
939.6
984.8
863.2
3,541.1
Interest on the public debt
659.3
611.6
599.3
689.4
2,559.6
Total
2,903.6
3,041.3
3,270.5
2,917.9
12,133.3
Public works:
Public buildings
43.0
67.7
86.5
105.9
303.1
Public highways
89.3
174.4
209.9
178.2
651.8
Rivers and harbors
106.5
121.3
116.8
118.4
463.0
PWA (grants and admin. expenses)
-
-
-
-
-
Other
11.0
13.9
26.3
25.2
76.4
Total
249.8
377.3
439.5
427.7
1,494.3
Unemployment relief;
Direct relief
-
I
-
350.7
350.7
-
-
-
Work relief
I
-
-
-
-
-
-
Civilian Conservation Corps
I
-
-
350.7
350.7
Total
-
-
-
Agricultural adjustment program
#
-
-
-
-
-
-
Social Security
-
-
-
Miscellaneous
-
I
Total nonrecoverable expenditures (excluding
bonus and debt retirement)
3,153.4
3,418.6
3,710.0
3,696.3
13,978.3
154.8
233.0
404.0
874.4
1,666.2
Loans (net)
I
-
627.0
110.7
737.7
Subscriptions to capital stock
Total expenditures (excluding bonus
and debt retirement)
3,308.2
3,651.6
4,741.0
4,681.4
16,382.2
-
1
-
-
Botras Prepayment
-
Debt retirement
553.9
440.1
412.6
461.6
1,868.2
3,862.1
4,091.7
5,153.6
Actual expenditures of the Government for fiscal years 1934-1937
228
(Classifications include expenditures from both general and emergency funds)
(In millions of dollars)
#
:
:
:
:
1934
:
1935
1936
:
:
1937
Total
:
:
Regular operating expenditures:
Legislative, judicial and civil establishments
572.5
597.7
781.1
797.8
2,749.1
National defense
540.3
709.9
911.6
935.1
3,096.9
Veterans' pensions and benefits
(excluding bonus prepayment)
556.9
607.1
677.9
573.3
2,415.2
Interest on the public debt
756.6
820.9
749.4
866.4
3,193.3
Total
2,426.3
2,735.6
3,120.0
3,172.6
11,454,5
Public works:
Public buildings
78.7
58.1
67.9
76.3
281.0
Public highways
267.9
317.3
243.9
350.6
1,179.7
Rivers and harbors
150.8
203.0
223.7
235.0
812.5
PVA (grants and admin. expenses)
18.8
48.9
233.9
273.0
574.6
Other
35.7
77.0
99.3
150.0
362.0
Total
551.9
704.3
868.7
1,084.9
3,209.8
Unemployment relief:
Direct relief
715.8
1,914.1
591.7
133.8
3,355.4
Work relief
805.1
11.3
1,264.4
1,896.7
3.977-5
Civilian Conservation Corps
331.9
435.5
486.3
385.8
1,639.5
Total
1,852.8
2,360.9
2,342.4
2,416.3
8,972.4
Agricultural adjustment program
290.3
743.0
542.6
522.8
2,098.7
Social Security
-
-
28.4
447.8
476.2
Miscellaneous
8.7
21.1
6.8
-
36.6
Total nonrecoverable expenditures (excluding
bonus and debt retirement)
5,130.0
6,564.9
6,908.9
7,644.4
26,248.2
Loans (net)
788.6
80.5
-175.2
-237.0
456.9
Subscriptions to capital stock
826.5
156.8
69.3
37.1
1,089.7
Total expenditures (excluding bomus and
debt retirement)
6,745.1
6,802.2
6,803.0
7,444.5
27,794.8
-
-
Bonus prepayment
1,673.5
556.7
2,230.2
Debt retirement
359.9
573.6
403.2
104.0
1,440.7
Total expenditures
7,105.0
7,375.8
8,879.7
8,105.2
31,465,7
Regraded Unclassified
Proprietary Interest of the United States in Governmental Corporations and Credit Agencies,
as of June 30, 1929 to 1937
229
(In millions of dollare)
:
1929
:
1930
:
1931
:
1932
:
1933
:
1934
:
1935
:
1936
:
1937
Financed wholly from Government funds:
Reconstruction Finance Corp.
-
-
-
780
1,498
2,452
2,035
1,804
1,491
Commodity Credit Corp.
-
-
1
-
-
206
154
244
123
Export-import Banks
-
-
-
-
-
14
14
18
17
Public Works Admin.
I
-
I
-
-
145
312
152
146
Regional Agric. Credit Corp.
-
I
-
-
150
51
77
35
27
Production Credit Corp.
-
-
-
-
I
106
121
121
121
Panama Railroad 8.
40
42
42
45
43
43
43
43
44
Shipping Board Merch. Fleet Corp.
210
207
217
233
224
143
182
151
87
War Emergency Agencies
14
11
10
10
10
10
9
9
8
Farn Loan Board - Corp. Loans
7
160
392
628
3
I
I
I
-
Farm Credit Administration
-
-
-
-
556
74
193
175
191
Inland Waterways Corp.
20
21
24
24
25
2
24
24
25
25
Railroad Obligations
62
55
40
39
38
38
31
30
30
Tennessee Valley Authority
-
-
-
-
-
9
64
96
179
Subsistence Homesteads (R.A.)
-
-
-
-
I
2
3
24
80
128
Federal Housing Administration
-
-
-
-
-
I
29
30
30
R. P. c. Mortgage Corp.
-
-
-
-
-
-
4
18
48
Rural Electrification Administration
-
-
-
-
-
I
1
1
12
Other
-
-
-
1
-
1
5
6
14
Total Group 1
353
496
725
1,759
2,544
3,319
3,317
3,038
2,721
Financed partly from Government and
partly from private funds:
Federal Land Banks
4
4
24
125
125
161
251
256
292
Federal Intermediate Credit Banks
32
33
34
36
60
85
84
103
104
Federal Farm Mortgage Corp.
-
-
-
-
-
197
206
201,
177
Banks for Ocoperatives
-
-
-
-
-
111
129
156
154
Home Loan Banks
-
-
-
-
43
61
82
100
121
Home Owners Loan Corp.
-
-
1
-
i
144
70
13
68
Federal Savings & Loan Insurance Corp.
-
-
-
-
I
-
102
104
108
Federal Savings & Loan Associations
-
-
I
-
-
1
32
102
48
Federal Deposit Insurance Corp.
-
-
I
-
I
150
150
150
150
War Finance Corp.
1
1
1
1
1
4
4/
Total Group 2
33
34
35
162
230
930
1,106
1,185
1,222
Grand Total
386
530
760
1,921
2,774
4,249
4,423
4,223
3,943
1
Source: Annual Report of the Secretary of the Treasury, 1936: Deily Treasury Statement, July 31, 1937.
Estimated. 3/ Transferred F.C.A. Less than one million.
Regraded Unclassified
230
PUBLIC HIGHWAYS
Authorizing Act of June 16, 1936
Apportioned in December, 1936
$216.5 W
To be apportioned in Dedember 1937
216.5
Total authorizations on books
433.0 M
Appropriated -
In Act of June 29, 1937
24.5
Balance not yet appropriated
408.5
To be appropriated -
In next deficiency bill
$ 2.0
In 1939 appropriation bill
281.5
In 1940 appropriation bill
a/125.0
408.5
To be expended -
In fiscal year ending June 30, 1938 -
Under Dec. 1935 and prior apportionments.
157.0
Under Dec. 1936 apportionments
41,5
198.5
In fiscal year ending June 30, 1939 -
Under Dec. 1936 apportionments
175.0
Under Dec. 1937 apportionments b/
91,5
266.5
In fiscal year ending June 30, 1940 -
Under Dec. 1937 apportionments
/ 125.0
Note. From the foregoing it will be noted that the budgets for 1939 and 1940
are already committed to "expenditures" of $266.5 M and $125.0 M, re-
spectively, under authorizations already enacted by Congress, making &
total of $391.5. This will be further increased by the amount ex-
pended in 1940 under any new program authorized by Congress.
at
This will be increased by amount appropriated and expended under any
new program authorized by Congress during the coming session.
Not yet made.
Accounts and Deposite
October 4, 1937.
of
231
PUBLIC HIGHWAYS
Prior
year
Fiscal
Fiscal
appor-
year
year
Total
tion-
1938
1939
ments
I. Authorizing Act
-----
6/16/36
6/16/36
II, Apportionment - - Date
12/29/36
12/ -/37
III. Apportionment - - Amount
$216.5
$216.5
433.0
IT. Appropriated by Congress - -- (Deduct)
Act June 29, 1937
24.5
- -
24.5
To be appropriated
192.0
216.5
408.5
In the next deficiency bill
2.0
- -
2.0
In the 1939 annual supply bill
190.0
91.5
281.5
In the 1940 annual supply bill
- -
a/125.0
125.0
192.0
216.5
408.5
I. To be expended (estimated)
-
In fiscal year 1938 (July 1/37 - June 30/38)
157
41.5
- -
198.5
In fiscal year 1939 ( If 1/38 - # 30/39)
-
175.0
91.5
266.5
In fiscal year 1940 ( If 1/39 - # 30/40)
-
- -
125.0
a/ 125.0
157
216.5
216.5
590.0
/
This will be increased by the amount to be expended under any new program authorized
by the Congress during the next session.
232
CONFIDENTIAL
Treasury Department
Division of Research and Statistics
Date 10/5
1937
To:
Secretary Morgenthau
From: Mr. Haas
The total receipts figure for
the fiscal year 1938-39 (estimated),
about which you just called me, is
$7,172,711,000.
Regraded Unclassified
--233
Actual expenditures of the Government for fiscal years 1926-1937, and Tentative Bevised Extimates for 1938
(Classifications include arpenditures from both general and emergency funds)
(In millions of dellare)
I
=
1
1928
:
:
:
:
1926
1
1
-
:
:
1927
1929
1930
1931
1932
,
1933
1934
1935
1936
1937
1934
impilar operating expenditures:
Legislative, judicial and civil establisimente
666.9
589.4
708.6
851.1
789.5
790.9
978.8
697.5
572.5
597-7
781.1
783.0
796.6
Intional defense
579-7
584.4
624.6
678.1
701.3
699.2
707.6
667.8
540.3
709.9
911.5
935.1
950.0
Teterans' pensions and benafits
(ercluding tomas preparent)
650.5
721.6
723.9
733.1
753.5
939.6
984.8
$63.2
556.9
607.1
677.9
573-3
570.0
Interest on the public debt
831.9
787.0
731,8
678.3
659.3
611.6
599.3
689.4
756.6
820,9
749.4
866.4
975.0
Total
2,729.0
2,652.6
2,768.9
2,940.6
2,903.6
3,041.3
3,270.5
2,917.5
2,426.3
2,735.6
1,180.0
3,157.8
3,241.6
2019
Public vorte:
Public buildings
2.1
7.5
6.7
30.5
43.0
67.7
86.5
105.9
78.7
58.1
67.9
76.3
60,0
Public highways
98.8
92.5
91.1
95-5
09.3
174.4
209.9
178.2
267.9
317.3
243.9
350.6
253.0
livers and harbors
70.3
65.4
72.9
83.4
106.5
121.3
116.8
118.4
150.6
203.0
223.7
235.0
173.0
PTA (grente and admin. expenses)
48.9
233.9
273.0
-
-
.
-
-
#
-
-
18.6
250.0
Other
3.4
8.2
9,5
10.6
11.0
13.9
26.3
25.2
35.7
11.0
99,3
150.0
150,0
Total
174,5
173.9
180.2
220.0
245,6
371.3
439.5
427.7
551.9
104.3
808.7
1,084,9
686,0
50%
Themployment relief:
Direct relief
-
.
-
-
350.7
715.6
1,914.1
591.7
-
-
-
133.8
80.0
fort relief
-
-
-
-
-
.
.
805.1
11.3
1,264.4
-
1,896.7
1,275.0
Divilian Conservation Corps
-
.
-
-
-
331.9
435.5
486.3
-
-
365,8
310.0
-
Total
-
-
-
-
.
-
350.7
1,052.8
2,360.9
2,342.4
-
2,416.3
1,665.0
12
-
542.6
533.6
Agricultural adjustment program
-
-
-
-
-
-
.
290.3
743.0
475.0
-
-
-
28.4
451.8
813.0
Secial Security and Bailroad Retirement
-
-
-
-
-
-
.
-
-
-
8.7
21.1
6.8
-
100.0
Viscellaneous and supplemental items
-
-
-
S
Total monrecoverable expenditures (excluding
benus and debt retirement)
2,901.6
2,056.5
2,969.1
1,160.6
3,153.4
3,418.6
3,710.0
1,696.3
5,130.0
6,564.9
6,908.9
7,544.4
7,180.6
Leage (net)
5.6
154.0
233.0
404.0
574.4
788.6
80.5
-175.2
- 237.0
0,0
-
-
-
Dubscriptions to capital stock. etc
1,0
5.0
-
-
527.0
110.7
$26.5
156.6
69.3
37.1
35.0
-
-
Total expenditures (excluding borras and
debt retirement)
2,903.6
2,857.5
2,969.1
3,171.2
3,308.2
3,651.6
4,741.0
4,651.4
6,745.1
6,602.2
6,803.0
7,444.5
7,215.6
I presiguent
1,673.5
556.7
30.0
F
.
,
-
-
-
-
-
,
-
Debt refirement
407.4
519.6
540.3
549.6
553.9
440.1
412,6
461.6
359.9
573.6
403.2
104.0
200.0
.
Total mentitures
3,391.0
3,377.1
3,509.4
3,720.5
1,862.1
4,091.7
5,153.6
5,143.0
7,105.0
7,375.8
6,879.7
6,105.2
7,445.6
1.174
7:80
11267
Regrade Unclassifie
infidential
234
Actual receipts of the Government for the fiscal years 1926-1937 and estimates for 1938
(In millions of dollars)
:
1926
:
1927
4
-
:
a
1928
1
:
1029
1930
1931
I
1
I
:Estinated
1932
1933
1934
1935
1936
1937
1938
some and profite taxes:
Corporation
1,095
1,308
1,292
1,236
1,263
1,026
630
394
397
572
T34
1,057
1,340
Individual
879
912
883
1,095
1,147
834
427
353
420
527
674
1,092
1,496
Incoss profits
-
-
-
-
-
-
-
-
3
7
15
25
29
Total income and profits taxes
1,974
2,220
2,175
2,331
2,410
1,860
1,057
747
520
1,106
1,427
2,174
2,055
incellaneous internal reverns:
Estate and gift taxes
119
101
60
62
65
48
47
34
113
212
379
306
417
Capital stock tax
97
9
9
6
2/
-
-
-
80
92
95
137
142
Alcoholic beverage taxes
27
21
15
13
11
11
9
43
259
411
505
594
657
fobacco taxes
371
376
196
434
450
falsh
399
403
425
was
501
552
548
Manufacturers' excise taxes
150
67
52
6
3
3/
244
365
342
383
V51
463
Stamp and sundry taxes
98
72
54
67
101
Si
46
149
219
151
158
168
204
Total miscellaneous internal reverns
862
646
616
608
630
568
501
ETS
1,401
1,667
2,021
2,208
2,411
recessing taxes
-
-
-
-
-
-
-
-
371
526
72
-
-
actel Security taxes:
Title VIII
-
-
-
-
-
-
-
-
-
-
-
207
59
Title II
-
-
-
-
-
-
-
-
#
-
-
58
77
Railroad retirement
-
-
-
-
-
.
-
-
-
-
2/
2/
154
Total social security taxes
-
-
-
-
-
-
-
-
-
-
-
265
754
bust enrichment tax
-
-
-
-
-
-
-
I
-
-
.
6
,
Total internal revenue (collection tasts)
2,836
2,866
7,791
2,939
3,040
2,428
1,558
1,620
2,672
3,299
3,520
4,653
6,065
Adjustment to daily Treasury statement
2
-
4
-
1
-
1
2
3
- 16
-
11
-
21
7
- 55
-
Total internal revenue (Treasury statement basis)
2,838
2,570
2.795
2,938
1,039
2,430
1,561
1,604
2,641
3.276
1,513
4,598
6,065
Pustoms 1/
579
605
569
602
587
378
328
251
313
143
387
486
199
receipts
546
554
678
493
552
382
117
225
162
179
216
210
210
Total receipts (daily Treasury statement basis)
3,963
4,129
4,042
4,033
4,175
3,190
2,006
2,060
3,116
3,800
4,116
5,254
6,774
Pigures for the years 1926-1931, inclusive, include tennace tax, Inter covered in Miscellaneous Receipts of the Treasury
Less than $500,000.
SUMMARY - THEATMENT DEPARTMENT - 1939
Increase (*) ur
decrease (-),
impress (+) CP
Butget allowance
Actival
decrease (+),
Rev
litimates of Appropriations, 1939
0511 atlone
compared with asti-
Suigat allowance
Appropriations
é
Ae eubmitted by
Allowed by
mates as submitted
Appropriation Title
1937
compared with
1930
department
Butget
by impartment.
1938 appropriations.
Annual Appropriations
little of the
I
352,251,156
I 561,237,300
I 537,792,900
I
Division of Research and Matistics
-$75,000,600
-$70,453.000
156,356
130,000
130,000
223,000
-
93,000
.
Office of owner<) Commel
95.000
17.712
153,000
152,000
140,500
-
office of Chief Clark
5,500
-
5.500
760.584
770.000
479.500
400,520
-
70,900
-
Offine of Repartment of Transury
5.9.360
Suildings
o
o
332,006
327,000
-
4,200
4)
Division of Printing
527.600
1.350.047
1,519,260
1.715,520
Office of Comissioner of Inrounts and
1,509,250
-
140,280
.
250,000
Pepositive
2,361,479
1,112,500
2,063,020
2.044.000
-
"Unlie Table Imprise
19,820
250.500
2,723,391
2,015,900
4,712,184
Division of
5,59 .700
-
151,464
-
773,500
64,317
44,900
44.500
Bureeu of Custome
o
-
60
35,655.009
30,372,166
57,010.000
- 1,350,100
.
ufflaw of Pressurer of the letter Itates
379,940
1,353,511
1,239,000
1,322,250
Buesse of Internal Versous
1,271,620
-
50,630
+
32,620
114,709.94
103.301,420
***700.800
94,669,500
-
releral Alechol (doinistration
5.137,000
-
0,051,020
1,76,913
450,000
150.000
Tureau of Maranties
450,000
o
o
1,325,000
1,267,600
1,412,500
1,507,000
-
Chest issued
45,600
-
99,400
24,176,590
30,970,131
25,865,527
-
5.104,506
.
Fureu of and
1,216,707
7.250.430
7,500,000
9,970,500
9,700,000
-
270,500
-
Tenrat Cervi Unition
2,200,000
1,025,102
1,013,810
1,495,250
1,545,050
-
149,508
+
office of the Comptrailer af the
331,040
290,927
275,900
275,000
malla Health arrine
250,0LD
,
0,200
-
7,140
17.972.901
21,140,900
inread of the Wind
23,580,157
22,037,200
-
1,340,937
.
4,977,670
890,220
2,900,405
Pronument
2,656,920
-
23,575
-
183.500
Futlin Francis
4,455,961
7.480.220
5,770,020
5,750.720
I
United of Tumply
25,100
-
99,500
545,205
300.000
500,000
500,000
Promition of the (11n)
0
o
25,000
115,000
115,000
115.000
0
0
Total, Appropriations
750,000,000
755.907.009
870,925.077
- 09.062,712
- 7/,075,753
Permarent Appropriations
Office at the
1,100,000
2,417,972
Fanks Thank
2,760,072
2.740,072
o
-
1-2,500
1,000.00
2,976,000
4.354,000
uffice ui the insure of the Thited Teache
6,000,000
-
354,000
.
1,072,000
5,000
5,270
5,500
3,000
0
-
1,670
Total, Appropriations
5.161,007
5,100,002
7,187,672
6,703,672
-
354,000
.
657,1130
Truet
Office of Commissioner of and
Deposite
15,00
11.790
10.700
Burnes of Customé
15,700
-
1,000
0
20%
5,000
5,000
factsu at Internal Ferenue
5,000
o
0
10,091,200
11.95.500
16.073,500
Testle -----
10,093,500
0
-
2,000
60,151
$0,000
20,600
Promoting Charles if the *2ind (Interest)
50,000
o
o
10,000
10,000
10,000
10,000
o
o
Total. Fevrt Mounte
10,050,200
19,901,000
10,970,000
-
5,000
-
2,000
es the Mélie
000.000,000
995,000,000
771,000,000
971.000.000
o
linkin. Time
101,753,050
- 40,000,000
581,003,191
570,000.000
990,000.000
o
.
infirments
34,000
0,910.605
1,515,000
1,515,000
1,515,000
o
o
liquid Total, Pressury Department
of of THE
suff southo Farks
-189,109.712
-$22,775,154
income GE lilive sugget
10,000
-
o
-
2,000
VERBAL COMPANY
or assistance
19,000,000
11.000,000
- 4,000,000
-
14,432,069.
lab sparating
$150,406,293
$160,812,832
$180,941,481
$168,373,969
- 12,567,512
+ 7,761,137
Refends
76,279,776
11,010,900
52,658,600
014 Age incorve
51,000,000
265.000,500
- 1,850,000
500,000,000
10,002,100
510,000,000
industion is interest end Aid-1n surplus
435,000,000
- 75,000,000
- 65,000,000
(faders) Land Banks)
06,978,712
60,000,000
29,550,000
Janaral Mills Yorks (public holldings
29,550,000
51,782,051
a
35,432,065.94
- 10,450,000
Internet MI the Public Debt
15,000,000
11,000,000
568,000,000
925,000,000
- 4,000,000
- 28,432,065.94
Debt retirements.
971,000,000
971,000,000
0
103,747,050
582,990,191
+ 46,000,000
591,515,000
591,515,000
o
- 8,916,809
Total.
$1,584,274,500
$2,304,653,988.96
$2,350,865,281
$2,257,447,769
-193,417,512
-$47,206,219.94
Trust Assounte
16,972,150
18.960.600
15,991,000
15,975.600
-
2,200
-
2,000
- Total
11,603,2,4,650
$2,325,634,788.94
$2,369,846,281
-093,419,712
-847,208,219.94
end com
Regraded Unclassified
Details
1991.
FINCAL THAN 1939
Increase (+) or
Impress (*) or
Decrease (-),
(-),
total
Sulget allowance
budget allowance
Item
of Appropriations, 1939
Chligations
exapered with acti-
Appropriated
compared with 1950
Sex
As minitied by
Allowed by
Apprepriation Title
1937
mates as submitted
1938
departments
appropriations
Budget
by department
Office of Bearetary of the Transury
L. Salariss. Office of Secretary of the Treasury...
4
205,272
. 207,500
.
212,900
4
2. Expenses, Merganey Benking, Gold Reserve and
207,300
- #
5,600
-
o
Silver Purchase into, Office of the Secretary
47,136
30,000
30,000
27,000
5. 014 Age Reserve Account, Social Security 100...
-
265,000,000
5,000
-
500,000,000
3,000
510,000,000
435,000,000
las #ubscriptions to Paid-In Surplus, Federal Land
- 75,000,000
- 65,000,000
Banks
34,445,806
20,000,000
o
o
5. Payments to Federal last banks os assounts of
o
- 20,000,000
reduction in interest retes on martgages
32,532.942
15,000,000
21,200,000
21,200,000
6. Payments to Federal Farm Mortgage Corp. redue-
o
+ 6,200,000
tion in interest rates - mortgages
0
5,000,000
8,350,000
8,350,000
o
-
7. Capital Stook, United States Housing Authority..
o
3,350,000
1,000,000
o
o
8. Payment of Interest on Deposite, Philippine
o
-
1,000,000
Islands (Indefinite)
1,100,000
2,427,572
2,780,072
2,780,072
o
+
362,500
Total, Office of Dearetary of the Treasury,
general fund
333.531.156
543,654.872
92.572.972
467.564.372
-
75,006,600
- 76,090,500
Division of Ensearch and Statistics
9. Salariss, Division of Research and Statistics..
68,324
60,000
60,000
160,000
.
10. Expenses, Energency Benking, Gold Reserve and
100,000
+
100,000
Filver Purchase lots, Division of Research
and Statistics
86,032
70,000
70,000
63,000
-
7,000
-
7,000
Total, Division of Research and Stabistics
154,356
130,000
150,000
225,000
-
93,000
+
95,000
Office of
Salaries, Office of Deneral Counsel
100,669
97,000
Expenses, Reargency Banking, Gold Peserve and
97,000
97,000
o
o
Silver Purchase Aste, Office of Osceral
(Countel
67.043
55,000
55,000
49,500
-
5.500
-
5,500
pial, Office of General Counsel
107.712
152,000
152,000
146,500
-
5.500
-
5,500
Office of Chief Clark
13. Office of Chief Clerk
515,564
920,000
129,580
129,120
-
Like Salaries, Emergency Banking, Gold Reserve and
400
-
390,000
Bilver Purchase lots, Office of Chief Clerk.
34.746
25,000
25,000
22,500
-
15. Contingent Treasury Department
2,500
.
150,263
170,000
2,500
270,000
200,000
-
70,000
.
10, Combingest Expenses, Emergency Banking, Gold
30,000
Reserve and Silver Purchase lots
66,011
55,000
55,000
49,000
-
5,000
-
6,000
Total. Office of Chief Clark
766,584
770.000
479,580
1,00,620
,
70,960
-
309,380
Office of Superistendent of Treasury Buildings
17a Salaries, Office of Superintendent of Treasury
Buildings
o
o
332,008
327,800
-
4,208
.
527,800
Division of Printing
18, Salaries, Division of Printing
69,047
69,240
70,520
69,240
-
19. Printing and Binding, Treasury
1,250
o
506,000
775.000
1,025,000
950,000
-
20, Stationery, Treasury Department
75,000
+
475,000
175,000
475.000
620,000
950,000
-
70,000
.
75,000
Total, Division of Printing
1,350,047
1,319,260
1,715,520
1,569,240
-
146,250
-
250,000
Office of Commissioner of Accounts and Deposits
-
a. Salaries, Office of Commissioner of resource
and Deposits
277,166
290,000
378,620
373,000
-
5.600
+
22. Solaries and Expenses, Division of Disbursement
83,000
1,359,480
1,427,500
1,431,700
1,417,500
-
14,200
.
25. Contingent Expenses, hells Moneys
10,000
227.394
200,000
158,500
150,500
o
-
2, Resolange of Minor Coins
41,500
22,383
25,000
25,000
25,000
0
o
25, Recolange of Silver Dolne
446,146
600,000
600,000
600,000
o
o
26. Belief of Indigent Persons in Alaska
19,641
20,000
20,000
20,000
o
27. Refunding Moneya Trronsessly Neceived and
o
Cerered
9,067
50,000
50,000
50,000
21, Deverment Louses in Ripart
o
o
o
500,000
200,000
200,000
o
-
300,000
Total, Office of Commissioner of Assente
and Deposits, General Fund
2,361,479
3,112,500
2,563,620
2.844,000
-
19,820
-
258,500
Trust documents
Vi, Payment of Unclaimed Manage
9,007
12,000
15,000
12,000
-
50m of Prosends assote of Liberty Loss
3,000
o
Associations, 1. T.
1,807
1,500
1,600
32. Return of Promote Undelivered Liberty Lean
1,600
o
o
i
53
100
100
100
o
a
Total, Office of Condissioner of
and Deposite, General and Trust Pants
2,372,006
3,126,200
2,080,520
2,857,700
-
Regraded-Unclassified
TREASURY DEPARTMENT - Continued
FISCAL TEAR 1939
Increase (*) or
Decrease (-),
Increase (*) or
Actual
Extimation of Appropriations, 1939
Budget allowance
Decrease (-),
Appropriation Title
Obligations
Appropriated
1937
is subsitted by
Allmed by
nonpared with esti-
butget
1938
department
mts as submitted
high
expared dia 1938
Public Debt Service
by department
appropriations
Fublic Deht Service
Distinctive Paper for United States Securities.
1,997,042
2,100,000
# 2,592,640
8 2,W1,700
726.549
716,900
1,149,54
- # 150,940
.
-
1,149,000
341,700
-
5%
-
432,100
Total, Public Debs Service proper, annual
appropriation
2,723,591
2,016,900
3,742,184
3,990,700
-
151,444
.
773,800
Expenses (Indefinite) of Loans (Act Sept. 24, 1917 A & E)
4,056,239
2,978,000
4,354,000
4,000,000
*
$50,000
+ 1,022,000
Total, Public Debt Service proper (axclusive
of interest end comulative sinking fund)
6,779.630
5.794.900
8,096,164
7,590.700
.
505,484
+
1,795,800
Division of Appointments
Inlaries, Division of Appointments
64.317
44.560
44.560
o
-
so
Bureau of Custome
Collecting the lievenue from Customs
20,515,558
20,636,060
22,372.166
21,016,000
Refunds and Trawbacks
- 1,356,166
.
579.940
15,340,331
16,000,000
16,000,000
16,000,000
o
o
Total, Bureau of Customs, general fund
35,895,009
56,636,060
38,372,166
37,016,000
- 1,356,166
.
379,960
Philippine Trust Fund
284
5,000
5,000
5,000
o
o
Total, Bureau of Customs, general and trust
funds
35,850.173
36,641,060
38,377,166
37,021,000
- 1,356,166
-
379,960
Office of Treasurer of the United States
Inlaries, Office of Treasurer of the United
States
1,130,668
1,150,000
1,250,250
1,200,000
-
18,250
-
50,000
Salaries, Office of Treasurer of the United
States (won)
100,356
85,000
74,000
71,620
-
2,380
-
13.360
Transportation and Insurance of Gold Cola and
Gold Cartificates, Gold Reserve let of 1934..
6,287
4,000
0
o
o
-
4,000
Total. Office of Transurer of the United
States, ensual
1,243,311
1,239,000
1,322,250
1,271,620
-
50,630
+
32,620
Contingent Expenses, National Currency Rein-
bursable (Indefinite)
5,660
5,270
3,600
3,600
o
-
1,670
Total, Office of Treasurer of the United
States
1,268,979
1,244,270
1,325,850
1,275,220
+
50,650
-
30.950
Suress of Internal Revenue
Gallesting the Internal Sevenue
51,803,735
58,240,520
62.678.000
97,596.000
- 3,252,000
-
Salaries and Expenses, Silver Purchase lot, 1934.
Internal Revenue
46,761
50,000
50,000
15,000
-
5,000
-
$,000
Refunding Internal Revenue Collections
32,253,003
30,000,000
36,850,000
35,000.000
- 1,850,000
+ 5,000,000
Malaries and tipenses, Refunding Processing
Bal. cont'd.
Dal. sent'd.
Mal. sont'd.
Taxes.
available
available
evailable
include and Payments of Prosessing Taxas, sto.,
Cotition Tobacco and Potato Asta, 1936
........
30,002,542
15,000,000
o
0
o
- 15,000,000
Additional Income Tax on Railroads is Alasta
3,100
10,900
6,800
6,000
o
-
Suitto
Total, Bureen of Internal Annual
...
114,789,961
103,301,420
99,766,800
94,669,500
- 5.137,000
- $25,400
Pullippine Trust Fund
745,077
745,000(Nevised) 745,000
745,000
o
Philippine Trust Fund, Commut 011 Tax
18,127,810
18,125,000
18,125,000
18,125,000
o
Puerto Biso Trust hat
221
500
500
500
o
+
Treasury Department Inforcement Title
III Net'l. Prohibition let, Puerto Rice and
Virgin Inlands
15,000
25,000
23,000
23,000
o
-
E
Total. Superv of Internal Revenue, Trust
Assounts
18,691,108
10,895,500
10,893.500
16,893,500
0
-
-
Total, Burien of Internal Revenue
133,61.010
122,196,920
118,600,300
113.543,300
+ 5,137,000
-
(Revised)
federal Aleghel Administration
Injuriow and Expenses, Federal Alsohol Adminis-
traties
476,915
450,000
450,000
450,000
o
Bursee of funnity
Regraded Unclassifie
Salaries and - fews of Supentine
1,329,000
1,267,600
1,412,600
1,307,000
-
45.600
+
State
Regraded Unclassified
TERASURY DEPARTMENT - Continued
FISCAL THE 1939
Increase
or
Decrease
(-).
Increase
(*)
Budget allowance
Decrease (-).
Actual
Retiastes of Appropriations, 1939
emport with with
Budget allows
Des
Obligations
appropriated
As submitted by
Allowed by
mates " absitted
sergared with
Title
1937
1958
department
Budget
by department
appropriations
how of the Miss
98. Relation, Office of Director of the Mist
#
30,271
-
36,360
I
30,520
e 30,520
4
o
:
160
1M. Inspectation of Bullism and Coin
9,633
35,000
215,000
100,000
o
.
65,000
101. Signature, Office of Director of the
M
5.000
5,200
6,800
6,000
-
800
.
6,000
M and Mints and Assay Offices
3,201,136
1,275,000
1,557,925
1,512,400
-
45.525
.
237,400
less, N/W Purchase à Ould eserre Act
1,045,626
1,120,000
1,082,250
1,000,000
-
62,250
-
120,000
Tytal, Jarison of the Wint
4,299,590
2,473.500
2,900,195
2,656,920
-
213,575
.
183,560
Insured Division, Public Buildings Branch
16. Esteral administricative Expenses. Public Buildings
919,566
914.220
914,220
914,220
o
o
un. Seales, Preservation and Equipment, Public
Relitive
-
1,606,945
2,750,000
2,750,000
2,750,000
0
o
10d. specifier Pares (w Publis Buildings
1,433,211
1,573,500
1,999,600
1,573,500
-
26,100
o
MY. Newserv and lesire of Same for Public Buildings
44.781
50,000
50,000
50,000
o
o
105. Operating supplity for Public Buildings
439.749
460,000
465,000
463,000
.
2,000
*
3,000
100. for Salief of Contrastors, Ast June 16,
Sal. cont'd,
Bal. cont'd.
Dal. cont'd.
1934
9,609
available
available
available
110, Naturial be Twain filled is Wreck of Shenandoah.
o
2,500
o
o
o
.
2,500
m. Transury Prilding, Tashington, D. C., Wiring
o
100,000
o
o
o
-
100,000
Total, Pronurement Division, Public Buildings
Branch, Exalusive of Public Buildings
Construction
4.453.941
5,850,220
5,776,820
5,750,720
.
28,100
-
99,500
112. Salaries and Expenses, Supply Branch
343,265
500,000
500,000
500,000
o
o
Total, Prosurement Division
4.797,226
6,350,220
6,278,820
6,250,720
-
26,100
-
99,500
American Printing House for the Blind
113. To Promote the Riveation of the Blind
5,000
115,000
115,000
115,000
o
o
114. To Promote the Stuestion of the Plint (Interest)
(Trust Fund)
10,000
10,000
10,000
10,000
o
o
Total, American Printing Rouse for the #1tal
75,000
125,000
125,000
125,000
o
o
Total, Treasury, less interest and retirements,
$579,519,409
$780,382,532
$792,107,261
$702,687,569
- 89,419,718
- 77,694.963
115. Interest on the Public Debt
866,000,000
925,000,000
971,000,000
971,000,000
0
116. Sinking Punt
103,733,650
581,083,191
990,000,000
590,000,000
+ 46,000,000
117. Retirements
14,000
1,515,000
o
1,515,000
1,515,000
+ 8,916,809
o
o
Grand Total, Treasury Department, exclusive of
Bureau of budget and Public Works Program
$1,551,267,059
$2,287,980,723
$2,154,622,281
$2,265,202,569
4 89,419,712
-$22,778,15L
Bureau of the Budget
Salaries and Expenses, Buress of the Budget
...
I
165,736
#
187,000
I
187,000
I
187,000
Fristing and Binding
31,820
35,000
o
37,000
o
37,000
a
.
2,000
Total, Bureau of the Budget
-
197.550
(
222,000
#
224,000
e
224,000
o
=
2,000
GENERAL PUBLIC works PROGRAM
Construation of Fublie Buildings
51,782,053
35,432,065.94
15,000,000
11,000,000
-
4,000,000
-
Increase (*) or
Detirmento (-).
Increase (*) or
tolget allowance
Dearause (-),
total
Setimates of Appropriations, 1999
-
Ouligations
compared with esti-
Budget allowance
Appropriated
As submitted by
Appropriation Title
Allowed by
mates as submitted
ocepared with 1950
1937
1958
department
Auger
by department
appropriations
Coast Guard
55- salarios, Office of Coast Guard
# 307,375
- 309.260
* 396,960
# 309,240
5% Pay and allowances, Cosst Quard
-
7.740
#
o
17,384,558
15,094,000
10,314,382
18,037,000
-
277.382
*
57,000
% Fuel and fater, Coast Duard
1,85,198
1,675,000
1,601,330
1,600,000
-
81.330
.
125,000
3. care Coset Guard
1,435,305
1,565,000
1,814,251
1,671,000
-
143,251
4.
100,000
4. Requiling and Repairing Stations, ma., Codet
mard
469,614
292,500
1,974,200
325,000
-
1,649,200
-
52,500
% Comunication Lines, Comist Guard
133.938
180,000
301,400
251,000
-
70,400
+
51,000
a. Civilian Employees, Coast Duard
190,656
192,000
209,960
205,200
-
4,700
+
15,200
allo Contingent Expenses, Cosst Geard
203,557
122,600
108,000
122,000
-
14,100
-
600
du Repaire to Coset Quard Vasanla
1,903,500
1,459,613
2,439,358
1,500,000
-
489,350
.
340,107
& Repairs to Const Irsard Airoraft
515,187
533,340
515,187
.
10.153
o
if Emplacement tirplanes, Cosst Guard
o
363,500
531,000
270,000
-
261,000
-
95,500
- Additional dirplanes, Cosst Guard
664.729
o
534,000
0
-
531,000
0
a. Tabablishing See Const Guard Stations
0
0
784,930
o
.
766.950
0
2. (stablishing Nr Stations, Cosat Guard
D
o
597,000
e
-
597,000
o
9. additional Goast Guard
o
o
750,000
700,000
-
50,000
.
700,000
Total. Coist hard
24,176,590
24,6,3,840
30,970,131
25,865,627
-
5,104,804
.
1,216,707
jurior of ingraving and Printing
s. Valories suid Expense. - of Engraving and
Printing
7,260,130
7,500,000
9,970,500
9,700,000
-
270,500
+ 2,200,000
Searet Service Division
n. Salarias, Incret Service Division
50,194
53,160
o
o
o
-
53,160
72. Suppressing Counterfeiting and Other Crimes
627.904
810,000
1,344,608
1,195,000
-
149,608
+
385,000
75. Salaries, Unite Bouse Police
115.314
146,900
146,900
146,900
o
o
The Dafforms and "quipment, White Bouse Police
3,080
3,750
3.750
3,750
0
o
Total, Secret Terrice Division
1,025,192
1,013,810
1,105,258
1,345,650
-
149,608
-
331,840
Office of Comptroller of the Currency
75. Inlaries. Office of Comptroller of the Currency
212,708
204.300
204,300
2016300
o
o
76+ Balaries. Office of Comptrollar of the Currency
(wes)
15,480
9,720
-
s.ale
-
7.40
23,164
16,300
7, Salaries. leargency tanking Ant. Office of
55.300
o
o
Comptroller of Currenays
99,055
95,300
55,300
266.860
-
6,240
-
7.140
Total, office of Comptroller of the Currency.
290.927
275.980
275,080
Public Health Tervice
316,000
o
o
s. Salaries, office of Surgeon General
308,136
316,000
510,000
131,554
+
108.000
" Pay of Commissioned Offiners
1,820,000
1,928,000
-
1,769,862
2,059,554
15,200
-
15,200
325,200
340,200
340,200
525,000
-
2, Pay of soting Assistent Surgeons
978,860
1,000,000
-
111,960
o
1. Pay of Other Employees
1,000,000
1,111,960
o
o
2. Freight, Transportation, sta.
25,080
25,150
25,150
25,450
63,560
04,000
35,000
o
-
3. Waistenance, National Institute of Health
56,000
99,000
5,801,990
6,457,000
635,000
-
.
507,000
in Pay of Persunnel and Waintenance of Hospitals
6,150,000
7,092,608
0
a
5. Quarantine Service
351,046
331,250
351.250
331,250
o
o
Su Preventing the Spreed of Epidemic Disease
252,516
260,000
250,000
260,000
o
o
7. Interstate Cuaractine Service
54,961
36,500
30,500
36,500
o
o
9. Centrol of Stulogia Products
44,550
55.000
55,000
55,000
o
0
9. Expenses, Division of Yeseres) Diseases
78,940
00,000
80,000
80,000
D. Expenses, Division of Mental Bygime
650,432
1,056,000
-
220.415
647,560
1,250,415
-
1,000
0
1. milite
960
1,000
6
1,000
D
D
2. Grants so States Cor Publis Health Work
6,000,000
6,000,000
8,000,000
6,000,000
5. Disamses and Sanitation Investigations, Public
o
o
Health Service
1,260,948
1,600,000
1,600,000
1,500,000
.
200,000
@00,000
les Maintenance, National Canser Institute
o
1,000,000
700,000
500.000
Total. Publis Health Service, General
19,972,901
22,037,200
- 1,340,937
21,11ab,950
25,386,137
Trust Accounts
a
5. National Institute of Health Punde
5,000
5,000
5,000
5.000
o
D. Money and Effects of Forear Patients, P.E.S....
1,535
1,500
1,500
1,500
o
7. Patients deposite. U.S. Marine Hospital, Carvilla
100
100
100
100
D. Personal Punds and Parsings of inmates, Barootis
o
Pures
31,516
50,000
50,000
50,000
o
Total. Public Health Service, Trust issount
60,151
56,600
50,600
50,600
Total, Fuhlie Health Service. General and
20,033,052
21,203,580
Trues insounts
23.142.797
22,093.800
- 1,3,0,937
5
Regraded Unclassified
Reading copy
239
Address of the Secretary of the Treasury,
to be delivered before the
Academy of Political Science,
at the Hotel Astor, New York City,
Wednesday Evening, November 10, 1937.
I welcome the opportunity to discuss before the
members and guests of the Academy of Political Science
the subject of Federal spending and its relation to
the balancing of the Federal budget.
Nineteen years ago tomorrow, we signed the
Armistice ending the World War. That war was enormously
costly in human values, and it was enormously costly
in material values. In the two years between the
middle of 1917 and the middle of 1919, the Federal
Government sustained a net deficit-of twenty-two
billion dollars.
88
3238
Unclassified
240
- 2 -
During the past four years, this country has
been engaged in another war. This time our enemy
was a great economic disaster. In this war, we
fought with jobs and with dollars to save farmers
from losing their farms; to save home owners from
losing their homes; to give not only bread but work
to the unemployed; to increase the security of jobs,
property values, and business profits; and to bring
order out of chaos in our economic system.
This war, like that other war, required a many-
sided campaign under intelligent and courageous
leadership - -- a leadership that was magnificently
supplied by President Roosevelt.
104
3134
241
- 3 -
Finally, this war, like that other war,
: . required a large spending program. This program,
plus the special needs arising out of the great
drought and the prepayment of the soldiers' bonus,
necessitated net outlays during the four years ended
June 30, 1937, of some fourteen billion dollars in
excess of our receipts.
of course, it is easily possible to criticize
some of the detailed uses of the relief funds. Let
us concede that there was some waste. In any
expenditure program of such magnitude this is
inevitable. But, contrasted with the human and
material values at stake, such wastes as may have
occurred shrink into insignificance.
108
3026
242
- 4 -
We deliberately used an unbalanced Federal
budget during the past four years to meet a great
emergency. That policy has succeeded. The emergency
that we faced in 1933 no longer exists.
I am fully aware that many of our problems
remain unsolved. I am aware that there still remains
a considerable volume of unemployment; that the
speculative markets have recently been under severe
pressure; and that our business indexes have recently
shown a declining tendency. I am further aware that
some persons contend that another great spending
program is desirable to ward off the risk of another
business depression.
101
2925
243
- 5 -
I claim no prophetic insight into the future.
But, after giving serious and careful consideration
to all of these and other factors, I have reached the
firm conviction that the domestic problems which face
us today are essentially different from those which
faced us four years ago. Many measures are required
for their solution. One of these measures, but only
one, in the present juncture is a determined movement
toward a balanced budget.
Early in 1933, after three years of progressive
deterioration, our whole economic mechanism was
demoralized. Under these conditions, there was no
agency outside of the Federal Government with the
resources and the courage to bring about a business
revival.
114
2811
244
- 6 -
Today the situation is greatly changed. We
are now nearing the end of one of the most active
years in the business history of this country. On
the whole, this high level of activity has been of
a healthy character -- not of the character that
usually marks an unhealthy boom and precedes a
serious depression. The present situation is not
characterized by the existence of huge inventories,
high interest rates, over-extended credit positions,
or great surpluses of housing and capital equipment.
We have not reached the stage of full employment of
our productive resources. On the contrary, from all
these standpoints, conditions are favorable for a
continued increase in the level of business activity.
115
2696
245
- 7 -
This stands in contrast to the unhealthy
excesses of 1929. It stands in even sharper
contrast to the banking collapse, the bread lines,
the bankruptcies, and the general demoralization
of 1933.
1
-
Despite the substantial increase in the public
debt during the past four years, the credit of the
Federal Government has remained absolutely unimpaired.
Not once during even the darkest days of the
depression did the Treasury experience the slightest
difficulty in borrowing all the funds that were
required. Moreover, the rates of interest on our
borrowings have been lower, for comparable securities,
than at any other time in the history of the country.
108
2588
246
- 8 -
But the underlying conditions that made
deliberate deficit spending the wisest kind of
policy during the depression have been altered
during the progress of recovery. Thus, when we
borrowed during the depression to finance our deficit
spending, a large part of the funds was obtained
through an expansion of bank credit. To this
extent, our spending did not absorb capital funds
that might otherwise have gone into private industry,
nor did it absorb by taxation, funds that might
otherwise have gone into private consumption. Even
to the extent that our bonds and notes were purchased
by non-banking investors, the effect was largely to
put to work capital funds that would otherwise have
remained idle.
115
2473
247
- 9 -
Our industrial recovery of the last year,
however, has created large new demands for private
capital. Our commercial banks have been again
utilizing their credit resources for the financing
of private industry. During the present calendar
year, the insured commercial banks of the country
have substantially reduced their holdings of Government
securities in order to meet actual and prospective
demands for commercial credit. The obligations that
they sold, plus an amount equal to the securities
newly marketed by the Treasury, were purchased by
investors. Any deficit spending under conditions of
active demand for private capital, would have to be
financed in large part by capital funds that would
otherwise be available for business purposes.
114
2359
248
- 10 -
your
The basic need today is to foster the full
application of the driving force of private capital.
We want to see capital go into the productive
channels of private industry. We want to see private
business expand. We believe that much of the remaining
unemployment will disappear as private capital funds
are increasingly employed in productive enterprises.
We believe that one of the most important ways of
achieving these ends at this time is to continue
progress toward a balance of the Federal budget.
I turn now to the immediate practical aspects
of budget balancing for the coming fiscal year.
What are the controlling figures?
105
2254
249
- 11 -
Our total receipts for this year were estimated
in the President's budget summation of October 19
at about six billion six hundred and fifty millions,
and our total net expenditures at about seven billion
(1/3)
three hundred and forty-five millions, leaving an
estimated net deficit of six hundred and ninety-five
millions.
To attain an ordinary balancing of the budget
next year -- that is, a balance after full provision
for accruing liabilities for old-age benefit payments,
but exclusive of debt retirement -- it would be
necessary to accomplish a net improvement of about
seven hundred million dollars in our budgetary
position, as last estimated. To be prudent, we
108
2146
250
- 12 -
should not count on an increase in revenues next
year from the existing tax structure. Nor should
we impose additional taxation. Instead, we should
plan to bring next year's expenditures within this
year's income.
But where can cuts totaling seven hundred
millions be made? After a careful study of the
whole problem, I have come to the following
conclusions: On the one hand, while everything
possible 1s being and will be done to keep a tight
rein on the regular operating expenses of the
Federal Government, including the national defense
and interest on the public debt, I do not believe
that we can find large savings in this field.
Further, our expenditures under the Social Security
116
2030
n
251
- 13 -
Act will increase next year.
On the other hand, by focusing attention on
the several classes of expenditures that have been
mainly responsible for our past deficits -- namely,
public highways, public works, unemployment relief,
and agriculture -- it is apparent that great savings
can be made.
Let me give you an 1dea of the possibilities
for savings in these fields.
First, take the item of highway expenditures.
Prior to the depression, the Federal grants to the
States for public highway construction generally
ran under one hundred million dollars annually. This
year the total Federal outlays for highways, inclusive
97
1933
252
- 14 -
of emergency expenditures, are estimated at two
hundred fifty-three millions; and, in addition, the
existing highway programs call for new appropriations
totaling more than four hundred million dollars for
the next two years. I believe it is now time to
return to the average annual level of highway
expenditures that existed prior to the depression,
especially because during the past few years many
other millions of dollars have been spent for
highways out of relief appropriations.
Second, there is the field of public works,
other than highways, on which we are spending five
hundred and seventy-three millions this year.
This is a greater sum than the total that was spent
for this purpose during the entire five-year period
121
1812
253
- 15 -
between 1926 and 1930, inclusive. Next year,
despite the fact that there will be available from
appropriations and allocations already made for this
purpose more than six hundred millions, I believe
that we can and should move definitely toward a lower
level of public works outlays.
Third, I sincerely hope that employment conditions
will make possible a further substantial reduction
in our outlays for unemployment relief and the C.C.C.
camps. During the present fiscal year, by reason of
more active private business, these expenditures are
already being reduced by more than seven hundred and
fifty millions below last year's.
104
1708
254
- 16 -
I turn next to our expenditures on behalf of
agriculture. The total of this year's expenditures,
exclusive of public highways, for the regular
activities of the department, the soil conservation
program, rural electrification, resettlement,
commodity loans, and lower interest rates for Federal
land bank borrowers, exceeds nine hundred million
dollars. Despite the magnitude of this sum, you
are all aware that possible further measures
involving large additional expenditures are now
being discussed.
I am strongly in favor of a long-range program
to maintain the independence and the purchasing
power of the farmer. Such a program must take into
99
1609
255
- 17 -
consideration the farmer's opportunities in the
foreign markets as well as in those at home; and
no agricultural program can long endure which makes
excessive demands upon the Federal Treasury, or is
unfair to consumers. The farmer himself does not
want subsidies, but rather such fair prices and
such balanced production of crops as will make
/
/
/
subsidies unnecessary for his decent economic status.
Balancing the budget is as much in the interest
of farmers as in the interest of other parts of our
population; and it requires the cooperation of the
farmer as well as of other sections of the public.
101
1508
256
- 18 -
slow
/
Only with the solid backing of the public can
we hope to achieve economies totaling seven hundred
millions in the four fields that I have cited.
Pause
There may be some persons who would counsel
a more drastic reduction of expenditures or a program
of far heavier taxation in order to make certain a
more substantial reduction in the public debt in
the next fiscal year. There are serious objections
to either of these courses.
I have already indicated that I believe it
undesirable to increase taxation. There are equally
compelling reasons why we should not reduce
expenditures too suddenly and too drastically. I
strongly favor a vigorous program for the progressive
1397
257
- 19 -
reduction of Federal expenditures to the minimum
demanded by the Government's responsibilities.
Obviously, however, one reaches a point in
reducing Government expenditures at which no further
reductions can be made, unless it is decided to
cripple many essential governmental activities --
in other words, unless it is decided to make drastic
changes in national policy. For example, it would
mean consideration of such things as weakening our
national defense, and slowing up or abandoning flood
control, soil erosion prevention, and relief for the
aged and the unemployed. Such a course, I believe,
would not have the approval of either the American
people or their elected representatives in Congress.
107
1290
258
- 20 -
Moreover, it would clearly be disastrous to
many of the needy unemployed, and disruptive to
many sections of private industry, if we were to
cut Government expenditures in the coming fiscal
year by much more than the amount I have indicated.
We are definitely in a transition period between
unbalanced and balanced Federal budgets; but I
firmly believe that there is just as much danger to
our economy as a whole in moving too rapidly in
this direction as there would be in not moving at
all.
Relatively few persons realize the striking
fact that the net improvement this year in the
budgetary position of the Federal Government as
estimated will amount to more than two billion dollars.
118
1172
259
- 21 -
In other words, the net deficit this year is
estimated at less than seven hundred millions as
compared with more than two billion seven hundred
millions last year.
This net improvement of more than two billion
dollars in a single year provides the best answer
to those who, in most cases ignorant of the true
Tm
2
facts, have publicly despaired of our ability to
3
balance the Federal budget.
True, much of this year's anticipated budgetary
improvement comes from increased revenue, but we
are supplementing this by also seeking reductions in
expenditures.
90
1082
260
- 22 -
In addition to these considerations, I should
like to point out that, as a result of the Social
Security Act and related State laws, it is estimated
that the Federal Government next year will receive
more than one billion dollars net for investment in
Government securities for the Unemployment Trust
Fund and the Old-Age Reserve Account. Although this
investment will not change the total amount of the
public debt, it will with a balanced budget result
in the transfer to these reserve accounts of more
than a billion dollars of Government obligations
now held by private investors.
Even during the decade of the Twenties, when the
Treasury was receiving large payments of interest
114
968
261
- 23 -
and principal on war debts, and from the sale of
surplus war materials, the maximum reduction made
in any single year in the public debt held by private
investors was about one billion three hundred
millions. The rate at which it is safe to reduce
the public debt in private hands depends upon the
rate at which private funds flow into investment
channels. It is unsafe to go too fast.
Pause
Although we are not contemplating any increase
in the total tax burden, the character of our tax
structure is being given earnest consideration.
The Federal tax system affects every one in the
country. We in the Treasury in studying tax problems
111
857
262
- 24 -
have two objectives always before us: First, that
the tax burden shall be distributed as fairly as
possible, and second, that the collection of taxes
shall be as little burdensome to the taxpayer as
possible.
It 1s with these aims that, by direction of the
President, we have been reviewing the whole tax
structure in the last few months and are just now
in the process of presenting to a committee of
Congress the information we have collected. The
study has not been directed toward raising additional
revenue. Instead, we have sought to determine whether
there are inequalities and injustices in the
distribution of the tax burden and whether there
110
747
263
- 25 -
are some taxes whose cost of collection and whose
burdensome effect outweigh the revenue gain. In
addition, we want to simplify collection and make
the taxpayer's record-keeping less difficult.
We realize that our tax laws are too complicated;
we want to make them less SO. We realize that there
are inequities; we want to eliminate as many of them
as we can.
In making this study, we have invited the
assistance and the advice of groups of taxpayers
and of individuals. We want to hear the taxpayer's
side of the story. We want all the facts we can get
and we have obtained both facts and opinions.
108
639
264
- 26 -
Our tax revenues come largely from individual
earnings and business profits. We do not wish to
impose levies which tend to dry up the sources of
tax revenue. The laws should be so written and
administered that the taxpayer can continue to make
a reasonable profit with a minimum of interference
from his own Federal Government; provided that the
taxpayer cooperates with his Government in carrying
out the purpose and the spirit of the tax laws. of
course, tax policy cannot properly be determined
from exceptional cases. We must look at the whole
picture. We base our decisions on extensive
information and upon analysis of actual tax records.
108
531
265
- 27 -
The amount of our income-tax revenue is only
about half our total internal revenue. Less than
three million people out of our total population
pay individual Federal income taxes. We would be
applying the principle of capacity to pay more justly
if we were to reduce the number of consumer taxes
and at the same time to increase the number of
income tax payers. Taxpayers who are squarely
confronted with their own tax burdens are bound to
be keenly alive to the way the money 1s being spent
by their Government.
42
439
266
- 28 -
The budget now nearing completion is predicated
on a definite estimate of receipts, based on the
existing tax structure. It 1s a cardinal point of
our policy that the tax system, as revised, must
not yield a smaller return for 1939 than the present
system would yield.
Pause
Let me repeat: We want to adjust inequalities
and remedy defects in the tax laws. In doing this,
we have sought the help of the taxpayer and have
given him a sympathetic hearing. If we find that
the operation of any particular tax 1s unfair, we
stand ready to say so publicly.
101
338
267
- 29 -
Pause
My object this evening has been to present, as
clearly and as frankly as I know how, a comprehensive
picture of the Federal expenditures and the budgetary
outlook. I have tried to make plain the underlying
economic reasons, as well as the humanitarian ones,
for the past deficits; and I have tried to bring out
clearly the considerations that now demand further
definite steps toward a balanced Federal budget. I
have shown why, in my opinion, this balance should be
sought by a reduction in expenditures without an
increase in the total of the tax burden. But I have
also shown that there is a limit to reductions; and
that balancing of budgets needs the help of industry
to keep up total tax receipts unless we are again to
resort to deficit financing.
133
205
Regraded Unclassified
268
-30- -
The principal aims of our budgetary policy
have been, and I hope will continue to be, to
promote a high level and healthy character of
business activity, a maximum volume of employment
at good wages in private industry, a reasonable
return to capital and enterprise, fair treatment
for our agricultural population, and adequate
revenues to meet the services now demanded of the
Federal Government.
The attainment of these ends rests very greatly
on private initiative and on the cooperation of
private enterprise. This is a necessary supplement
to any efforts which the Government can put forth.
This Administration is going to do everything
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102
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possible to promote a continuation of recovery
and to balance the budget through cutting
expenditures. But I wish to emphasize that in
no event will this Administration allow anyone to
starve, nor will it abandon its broad purpose to
protect the weak, to give human security and to
seek a wider distribution of our national income.
We are confident that, with the full cooperation
of the business world, our present difficulties
will be overcome; and that the aims that I have
set forth above, which are properly those of private
business as well as those of the National Government,
will be achieved.
o0o
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270
CAUTION - FUTURE RELEASE. The following address by Secretary
Morgenthau is for release upon delivery, which is expected to
begin at 9:30 P.M., Eastern Standard Time, Wednesday evening,
November 10, 1937. It must be treated as COMPLETELY CONFIDENTIAL
until it has been delivered.
Address of the Secretary of the Treasury,
to be delivered before the Academy of Political Science,
at the Hotel Astor, New York City,
Wednesday evening, November 10, 1937.
I welcome the opportunity to discuss before the members and guests
of the Academy of Political Science the subject of Federal spending and
its relation to the balancing of the Federal budget.
Nineteen years ago tomorrow, we signed the Armistice ending the
World War. That war was encrnously costly in human values, and it was
enornously costly in material values. In the two years between the
middle of 1917 and the niddle of 1919, the Federal Government sustained
a net deficit of twenty-two billion dollars.
During the past four years, this country has been engaged in another
war. This tine our enemy was a great economic disaster. In this war, we
fought with jobs and with dollars to save farmers from losing their farms:
to save home owners from losing their homes; to give not only bread but
work to the unemployed; to increase the security of jobs, property values,
and business profits; and to bring order cut of chaos in our economic system.
This war, like that other war, required a nany-sided campaign under
intelligent and courageous leadership - a leadership that was magnificantly
supplied by President Roosevelt.
Finally, this war, like that other war, required a large spending
program. This program, plus the special needs arising out of the great
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271
drought and the prepayment of the soldiers' bonus, necessitated net out-
lays during the four years ended June 30, 1937, of some fourteen billion
dollars in excess of our receipts.
Of course, it is easily possible to criticize some of the detailed
uses of the relief funds. Let us concede that there was some waste. In
any expenditure program of such nagnitude this is inevitable. But, con-
trasted with the human and material values at stake, such wastes as DAJ
have occurred shrink into insignificance.
We deliberately used an unbalanced Federal budget during the past
four years to meet a great emergency. That policy has succeeded. The
emergency that we faced in 1933 no longer exists.
I an fully aware that many of our problems remain unsolved. I an
aware that there still remains a considerable volume of unemployment;
that the speculative markets have recently been under severe pressure:
and that our business indexes have recently shown a declining tendency.
I am further aware that some persons contend that another great spending
program is desirable to ward off the risk of another business depression.
I claim no prophetic insight into the future. But, after giving
serious and careful consideration to all of these and other factors, I
have reached the firm conviction that the donestic problems which face us
today are essentially different from those which faced us foom years ago.
Many beasures are required for their solution. One of these measures,
but only one, in the present juncture is a determined movement toward
a balanced budget.
Early in 1933, after three years of progressive deterioration, our
whole economic mechanism was demoralized. Under these conditions, there
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was no agency outside of the Federal Government with the resources and
the courage to bring about a business revival.
Today the situation is greatly changed. We are now nearing the end
of one of the most active years in the business history of this country.
On the whole, this high level of activity has been of a healthy character. -
not of the character that usually marks an unhealthy boom and precedes a
serious depression. The present situation is not characterized by the
existence of huge inventories, high interest rates, over-extended credit
positions, or great surpluses of housing and capital equipment. We have
not reached the stage of full employment of our productive resources. Cn
the contrary, from all these standpoints, conditions are favorable for &
continued increase in the lovel of business activity.
This stands in contrast to the unhealthy excesses of 1929. It stands
in even sharper contraxt to the banking collapse, the bread lines, the
bankruptcies, and the general demoralization of 1933.
Despite the substantial increase in the public debt during the past
four years, the credit of the Federal Government has remained absolutely
unimpaired. Not once during even the darkest days of the depression did
the Treasury experience the slightest difficulty in borrowing all the funds
that were required. Moreover, the rates of interest on our borrowings
have been lower, for comparable securities, than at any other time in the
history of the country.
But the underlying conditions that made deliberate deficit spending
the wisest kind of policy during the depression have been altered during
the progress of recovery. Thus, when we borrowed during the depression
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to finance our deficit spending, a large part of the funds was obtained
through an expansion of bank credit. To this extent, our spending did
not absorb capital funds that might otherwise have gone into privato in-
dustry, not did it absorb by taxation funds that might otherwise have gone
into private consumption. Even to the extent that our bonds and notes
were purchased by non-banking investors, the effect was largely to put to
work capital funds that would otherwise have remained idle,
Our industrial recovery of the last year, however, has created large
new domands for private capital. Our commercial banks have been again
utilizing their credit resources for the financing of private industry.
During the present calendar year, the insured commercial banks of the
country have substantially reduced their holdings of Government securities
in order to moot actual and prospective demands for commercial credit. The
obligations that they sold, plus an amount equal to the securities nowly
markoted by the Treasury, were purchased by investors. Any doficit
spending under conditions of active domand for private capital would have
to be financed in large part by capital funds that would otherwise be
available for business purposes.
The basic need today is to foster the full application of the driving
force of private capital. We want to see capital go into the productive
channels of private industry. Wo want to seo private business expand. We
believe that much of the remaining unemployment will disappear AS private
capital funds are increasingly employed in productive enterprises. To
believe that one of the most important ways of achieving these onds at this
timo is to continue progress toward a balance of the Federal budget.
Regraded Unclassified
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I turn now to the immediate practical aspects of budget balancing
for the coming fiscal year. That are the controlling figures?
Our total receipts for this year were estimated in the President's
budget summation of October 19 at about six billion six hundred and fifty
millions, and our total net expenditures at about seven billion three
hundred and forty-five millions, leaving an ostimated net deficit of
six hundred and ninety-five millions.
To attain an ordinary balancing of the budget next year - that is,
a balance after full provision for accruing liabilities for old-age benefit
payments, but exclusive of debt retirement -, it would be necessary to
accomplish a not improvement of about seven hundred million dollars in our
budgetary position, as last estimated. To be prudent, we should net count
on an increase in revenues next year from the existing tax structure. Nor
should we impose additional taxation. Instead, we should plan to bring
next year's expenditures within this year's income.
But where can cute totaling seven hundred millions be nade? After
a careful study of the whole problem, I have cone to the following conclusions:
On the one hand, while everything possible is being and will be done to
keep B. tight rein on the regular operating expenses of the Federal Govern-
ment, including the national defense and interest on the public debt, I do
not believe that we can find largo savings in this field. Further, our
expenditures under the Social Security Act will increase next year.
On the other hand, by focusing attention on the several classes of
expenditures that have been nainly responsible for our past deficits -
namely public highways, public works, unemployment relief, and agriculture -
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it is apparent that great savings can be made.
Let me give you an idea of the possibilities for savings in these
fields.
First, take the item of highway expenditures. Prior to the depression,
the Federal grants to the States for public highway construction generally
ran under one hundred million dollars annually. This year the total Federal
outlays for highways, inclusive of emergency expenditures, are estimated
at two hundred fifty-three millions; and, in addition, the existing high-
way programs call for new appropriations totaling more than four hundred
million dollars for the noxt two years. I believe it is now time to roturn
to the average annual level of highway expenditures that existed prior to
the depression, especially because during the past few years many other
millions of dollars have been spent for highways out of relief appropriations,
Second, there is the field of public works, other than highways, on
which we are spending five hundred and seventy-three millions this year.
This 1s a greater sum than the total that was spent for this purpose during
the entire five-year period between 1926 and 1930, inclusive. Next year,
despite the fact that there will be available from appropriations and allo-
cations already made for this purpose more than six hundred millions, I
believe that we can and should move definitely toward a lower lovel of
public works outlays.
Third, I sincerely hope that employment conditions will make possible
a further substantial reduction in our outlays for unemployment rolief and
the 0.0.0. camps. During the present fiscal year, by reason of more active
private business, these expenditures are already being reduced by more than
Regraded Unclassified
276
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seven hundred and fifty millions below last year's.
I turn next to our expenditures on behalf of agriculture. The total
of this year's expenditures, exclusive of public highways, for the regular
activities of the department, the soil consorvation program, rural olec-
trification, resettlement, commodity loans, and lower interest rates for
Federal land bank borrowers, exceeds nine hundred million dollars. Despite
the magnitude of this sum, you are all aware that possible further measures
involving large additional expenditures are now being discussed.
I am strengly in favor of a long-range program to maintain the inde-
pendence and the purchasing power of the farmer. Such a program must take
into consideration the farmer's opportunities in the foreign markets as
well as in those at home; and no agricultural program can long endure which
makes excessive demands upon the Federal Treasury, or is unfair to con-
sumers. The farmer himself does not want subsidies, hut rather such fair
prices and such balanced production of crops as will nake subsidies un-
necessary for his docent oconomic status.
Balancing the budget is as much in the interest of farmers as in the
interest of other parts of our population; and it requires the cooperation
of the farmer as well as of other sections of the public.
Only with the solid backing of the public can we hope to achieve
economies totaling seven hundred millions in the four fields that I have
cited.
There may be some persons who would counsel A more drastic reduction
of expenditures or a program of far heavier taxation in order to make
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certain a more substantial reduction in the public dobt in the next fiscal
year. There are serious objections to either of these courses.
I have already indicated that I believe it undesirable to increase
taxation. There are equally compelling reasons why we should not reduce
expenditures too suddenly and too drastically. I strongly favor n vigorous
program for the progressive reduction of Federal expenditures to the
minimum demanded by the Government's responsibilities.
Obviously, however, one reaches a point in reducing Government ex-
penditures at which no further reductions can be made, unless it is decided
to cripple many essential governmental activities - in other words, unless
it is decided to make drastic changes in national policy. For example,
it would mean consideration of such things as weakening our national
defense, and slowing up or abandoning flood control, soil erosion provention,
and relief for the aged and the unemployed. Such a course, I believe,
would not have the approval of either the American people or their elected
representatives in Congress.
Moreover, it would clearly be disastrous to nany of the needy unen-
ployed, and disruptive to many soctions of private industry, if ve wore to
cut Government expenditures in the coming fiscal year by much more than
the amount I have indicated.
We are definitely in a transition period between unbalanced and
balanced Federal budgets; but I firnly believe that there is just as
much danger to our economy as & whole in noying too rapidly in this direc-
tion as there would be in not noving at all.
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Relatively few persons realize the striking fact that the net
improvement this year in the budgetary position of the Federal Covernment
as estimated will anount to more than two billion dollars. In other words,
the net deficit this year is estimated at less than seven hundred millions
as compared with more than two billion seven hundred millions last year.
This net improvenent of more than two billion dollars in a single
year provides the best answer to those who, in most cases ignorant of the
true facts, have publicly despaired of our ability to balance the Federal
budgot.
True, much of this year's anticipated budgetary improvement comes
from increased revenue, but we are supplementing this by also seeking
reductions in expenditures.
In addition to these considerations, I should like to point out that,
as a result of the Social Security Act and related State laws, it is 00-
timated that the Federal Government next year will receive more than one
billion dollars net for investment in Government securities for the
Unemployment Trust Fund and the 01d-Age Reserve Account. Although this
investment will not change the total anount of the public debt, it will
with a balanced budget result in the transfer to these reserve accounts
of more than a billion dollars of Government obligations now held by
private investors.
Even during the decade of the Twenties, when the Treasury was re-
ceiving large payments of interest and principal on war debts, and from
the sale of surplus war materials, the naximum reduction pade in any
single year in the public debt held by private invostors was about one
278
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billion three hundred millions. The rate at which it is safe to reduce
the public debt in private hands depends upon the rate at which private
funds flow into investment channels. It is unsafe to gc too fast.
Although we are not contemplating any increase in the total tax
burden, the character of our tax structure is being given earnost consideration.
The Federal tax system affects everyone in the country. We in the
Treasury in studying tax problems have two objectives always before us:
First, that the tax burden shall be distributed as fairly as possible,
and second, that the collection of taxes shall be as little burdensomo
to the taxpayer as possible.
It is with these ains that, by direction of the President, we have
been reviewing the whole tax structure in the last few months and are
just now in the process of presenting to a committee of Congress the
information we have collected. The study has not been directed toward
raising additional revenue. Instead, we have sought to determine whother
there are inequalities and injustices in the distribution of the tax burden
and whether there are some taxes whose cost of collection and whose burden-
some effect outweigh the revenue gain. In addition, we want to simplify
collection and nake the taxpayer's record-keeping less difficult.
We realize that our tax laws are too complicated; we want to nake
them less 50. We realize that there are inequities: we want to eliminate
as nany of them as we can.
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In making this study, We have invited the assistance and the advice
of groups of taxpayers and of individuals. We want to hear the taxpayer's
side of the story. We want all the facts we can get and we have obtained
both facts and opinions.
Our tar revenues come largely from individual earnings and business
profits. We do not wish to impose levies which tend to dry up the sources
of tax revenue. The laws should be so written and administered that the
taxpayer can continue to make a reasonable profit with a minimum of inter-
ference from his own Federal Government; provided that the taxpayer co-
operates with his Government in carrying out the purpose and the spirit
of the tax laws. Of course, tax policy cannot properly be determined from
exceptional cases. We must look at the whole picture. We base our decisions
on extensive information and upon analysis of actual tax records.
The amount of our income-tax revenue is only about half our total
internal revenue. Less than three million people out of our total popula-
tion pay individual Federal incomo taxes. We would be applying the prin-
ciple of capacity to pay more justly if we were to reduce the mumber of
consumer taxes and at the same time to increase the number of income tax
payers. Taxpayers who are squarely confronted with their own tax burdens
are bound to be keenly alive to the way the money is being spent by their
Government.
The budget now nearing completion is predicated on a definite estimate
of receipts, based on the existing tax structure. It is a cardinal point
of our policy that the tax system, as revised, must not yield a scaller
return for 1939 than the present system would yield.
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Let ne repeat: We want tc adjust inequalities and renody defects
in the tax laws. In doing this, we have scught the help of the taxpayer
and have given hin a sympathetic hearing. If we find that the operation
of any particular tax is unfair, we stand ready tc say BC publicly.
My object this evening has been to present, as clearly and as frankly
as I know how, a conprehensive picture of the Federal expenditures and the
budgetary cutlock. I have triod to nake plain the underlying economic
reasons, as well as the humanitarian cnos, for the pnst deficits; and I
have tried to bring cut clearly the considerations that now deriand further
definito stops toward a balanced Federal budget. I have shown why, in iV
opinion, this balance should be sought by a reduction in expendituros with-
cut an incroase in the trtal (f the tax burden. But I have also shown
that there is n limit to reductions; and that balancing of budgets noeds
the help of industry to keep up total tax receipts unloss we are again to
rescrt tc deficit financing.
The principal nins of our budgetary policy have boon, and I hope
will continuo to be, to prencto a high level and healthy character of
business activity, a naximun volune of employment nt need wages in
private industry, & reasonable return to capital and enterprise, fair
treatment for our acricultural population, and adequate revenues to neet
the services new donanded of the Federal Government.
28
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The attainment of these ends rests very greatly en private initiative
and on the cooperation of private enterprise. This is a necessary supple-
ment to any efforts which the Government can put forth. This Administration
is going to dc everything possible tc promote a continuation of recevery
and to balance the budget through cutting expenditures. But I wish to
emphasize that in nc event will this Administration allow anyone tc starve,
nor will it abandon its broad purpose to protect the weak, to give hunan
security and to seek a wider distribution of cur national income. To are
confident that, with the full cooperation of the business world, our
present difficulties will be overcone; and that the aims that I have set
forth above, which are properly those of priyate business as well as those
of the National Government, will be achieved.
--c00-
Regraded Unclassified